Businesses must do a bank reconciliation to ensure that their bookkeeping records accurately reflect the amount of money they have in the bank. As more businesses switch to alternative payment methods like e-wallets, it is important to remember that bank reconciliation also applies to the money that moves through them.
However, the vast majority of corporate accounts are still housed in banks, and the same fundamental method used in bank reconciliation may be used by businesses to locate cash situations elsewhere.
Learning About the Bank Reconciliation Statement
Payments and receipts of funds are confirmed to be in the bank-by-bank reconciliation statements. If there are discrepancies between the two, you may use the reconciliation statement to make the appropriate changes and modifications. Once a month, an accountant in most businesses processes reconciliation statements.
Let’s pretend a company’s operating account balance on July 1 is $15,000. It issues three separate monthly checks totaling $1,000. $397. and $1,900. It also puts down the equivalent of $7,000. Their book balance is $18,648, while their reconciliation statement indicates a balance of $18,703. After reviewing the bank reconciliation statement, the company discovered it should have recorded the $25 monthly service charge. The investigation also reveals that a $397 cheque was cashed for just $367. The business may now take the necessary actions to correct the faults and restore financial equilibrium.
The significance of a bank’s reconciliation may best be understood by considering why it is necessary. Enough money is essential so a company may spend on advertising, research and development, and technology. A company’s ability to finance new initiatives, or lack thereof, at any particular moment may be determined, in part, by the results of its bank reconciliation operations.
Determine A Cash Flow Forecast
A company must know how much cash is deposited and withdrawn from its accounts. That knowledge is essential for making both large and minor financial choices, such as paying a vendor or issuing a special dividend. A clear picture of your company’s liquid assets is revealed via a bank reconciliation.
Call Attention To Suspected Activity
Bank fraud is easy to spot when doing an itemized reconciliation. Let’s pretend a business has paid $440 in heating repairs using a corporate cheque. Whether the firm checks its bank account and finds a debit for $490 instead of $480, it will instantly wonder whether the amount was altered.
Bring issues with accounts receivable to the forefront. A corporation should do bank reconciliation regularly to resolve concerns with receivables, such as unpaid bills.
How Do I Reconcile My Bank Account In Sage?
- Input a brief description of your argument
- Verify the most recently tallied total
- Harmonize your dealings
- Check your bank account balance.
- Access the reconciled report (if desired)
Conclusion
Bank reconciliation is the process through which a business verifies that its bookkeeping cash balances match the amounts shown on its bank statements. It is a crucial aspect of keeping the books for any business.
Better cash flow management, AR management, and fraud detection are all possible outcomes of regular bank reconciliation. With the correct procedures and tools, businesses may streamline their bank reconciliation operations to save time for other endeavors.