Reconciliation in Business: What Is It and Why Is It Vital
Managing the financial aspect of your startup or corporation can be overwhelming, especially when you are new to the world of business. This involves account reconciliation, which is the process of making sure your internal financial records and your monthly statements from external sources match up. To achieve this, you must know how to reconcile your accounts accurately.
Reconciling your accounts or comparing your financial transactions and balances is crucial to help you catch fraudulent or overcharged credit card transactions, avoid overdrafts on cash accounts, determine theft or incorrectly recorded income and expense entries, and explain timing differences. As a result, you can have peace of mind knowing that you are saved from paying overdraft fees and keep all your transactions error-free. Learn more about the process involved by following the steps below:
1.Compare your register with your statement
Using reliable accounting software helps you save time and energy since it does most of the work for you. But the reconciliation process requires you to check some transactions that may have missed or never entered the accounting system.
The first thing you need to do is to compare your internal account register with your bank statement and make sure that they match. If you are having a hard time checking each and every item, you can reach out to our professionals. We specialize in bookkeeping in New York, so we are more than capable of doing that for you.
2. Take a look at all incoming funds
Similar to the outgoing funds, check all incoming funds and confirm if they are reflected in both your internal records and your bank account. Look for deposits and account credits that are not recorded by the bank, note them to your statement balance, and make entries for money deposits that are not yet included in your internal records. To help you have an easier time accomplishing all of these, don’t hesitate to call our trusted bookkeepers in NYC.
3. Confirm if all outgoing funds are reflected in your bank account and records
Your outgoing funds should all be reflected in both your internal records and your bank account. These include checks, ATM transactions, and other charges. Subtract them from your bank statement balance. Make sure to note charges on your bank statement that are not in your internal records and watch out for charges, including ATM service charges, bank charges, uncleared checks, and internally recorded auto-payments that haven't cleared the bank account.
4. Check for bank errors
Spotting bank errors is crucial since it can affect the financial situation of your business. If they occur, contact your bank immediately to report the error and ask to add or subtract the proper amount from your account balance.
5. Correct all discrepancies
Take note of all the differences between your internal books and bank accounts. Once all discrepancies have been corrected, your bank statement balance should now be accurate and equal to the balance in your internal records.
Conclusion
Reconciling your accounts accurately is important for the financial health of your business. By learning how to do it properly, you can detect fraud, errors, and discrepancies ahead of time and address them immediately. When you need help on how to do this, work with dependable accountants.
Let our skilled accountants address your accounting needs. We offer bookkeeping services in New York. Get in touch with us to learn more about how we can help you!