- Bank account reconciliation ensures business financial accuracy
- Reconciliations compare bank statements with business legders
- They help to show the true state of a company’s finances
- Errors and fraud can be uncovered and corrected
- SyncLedgers makes reconciliations easy for small businesses
There are often differences between what businesses write in their accounting books, and what the bank says they should actually have in their accounts. Because of these discrepancies, it’s necessary for every business to carry out a bank account reconciliation on a regular basis.
What is a Bank Account Reconciliation?
A bank account reconciliation is where you compare your business ledgers with your bank statements. When there is any discrepancy between the final totals either record reflects, you’ll need to go through both with a fine-toothed comb.
Very often, banks will assess fees on your accounts that you won’t necessarily reflect automatically on your own ledgers. You need to review your bank statements, note all such fees, and reflect them in the debits column of your ledgers.
Likewise, the bank may not necessarily reflect the most recent transactions that you have handled. Even in our modern hyper-connected age, it sometimes still takes a couple of days for checks to clear through all of the bank’s systems.
What do Reconciliations Uncover?
There are important reasons why you need to do a regular bank account reconciliation, beyond just making sure that the numbers match up. The different ways that the numbers might not match up can be highly revealing about the conditions of your accounts and your business generally.
For one thing, if you’re using accrual-based accounting, it is almost certain that your statements and your ledgers will not match. That’s just because of the nature of accrual-based accounting. If you’re using cash-basis accounting, you’re recording your transactions at the same time as the bank anyway, so this process becomes moot.
The point of doing a bank account reconciliation with accrual-basis accounting is so that you can see the actual, true condition of your accounts. It lets you see what’s really there, rather than just what’s on paper or in the electronic records.
Doing these reconciliations also helps you to understand better the amount of time that it takes for your money to move from your business to the bank and vice versa. Because these processes do take time, they can make a huge difference in the health of your business.
If you accidentally start spending money that you don’t have in your accounts yet, because you didn’t know that things don’t post as quickly as you thought, you may end up doing your business financial harm through bank overdraft fees.
These reconciliations, therefore, help you see the actual cash flow that your business experiences. How fast is your money moving, from where, and to where? These are the questions that reconciliation can answer.
Sometimes, mistakes happen. Maybe somebody’s hand slipped while writing an entry in the ledger. Perhaps a programming error in the bank system added an extra zero where it shouldn’t be. A reconciliation can uncover these errors. Leaving those errors in place without correction can cause serious harm later on.
It’s important to make sure that everything is accurate because errors have a tendency to compound. Left unaddressed, they result in very uncomfortable audits.
With all of that, there’s an even more important reason to carry out a bank account reconciliation. It helps to eliminate the possibility of fraud when errors appear.
We all hope that it never happens in our businesses, but sometimes people just do bad things with money. It’s not always easy to hide these transgressions, though. Just as people make mistakes once in a while despite being completely honest, individuals engaging in criminal activity make mistakes as well. Discovering these mistakes, and tracing them back to those responsible for them, can root out corruption and bring about justice.
SyncLedgers Reconciliations are Easy
We follow the Generally Accepted Accounting Practices (GAAP) guidelines for account reconciliation. Whether you use standard double-entry bookkeeping, or you prefer to keep simpler ledgers, we can help.
In either case, you can expect a thorough review of your finances to reveal any mistakes or missing data. We provide the necessary time to correct them appropriately and avoid unpleasant financial surprises.
We check all your bank and credit card statements against the books you maintain, or that we maintain for you. Detailed reports of the process and our findings, including full documentation, prove the accuracy of the reconciliation.
It’s even easier when you already use our services to handle daily transaction processing and periodic financial reporting. Contact us today to make sure that your business finances are always accurate!