What You Should Know About Bank Reconciliation Process
Bank reconciliation is an integral part of managing your finances. You would want to see how much money you have in your account and how much you have spent. Through this, you can monitor your transactions, and see if there are any errors or unusual transactions made in your account.
What Is Bank Reconciliation?
Bank reconciliation is the method of matching and balancing money and transactions in your accounting records with the records shown on your bank statement. This way, you can determine any differences, so you can change them and have them investigated to resolve dissimilarities and identify unwanted transactions.
How Does Bank Reconciliation Work?
When you’re reconciling your accounts, the first thing to do is to compare and match your own record of transactions to your bank statement. Check if the transactions are similar. If there are any huge differences, you must have them investigated and checked. It might just be an error, but in worst-case scenarios, it might be because of fraudulent transactions.
In order to get all of the data and information you need for bank reconciliation, you can check your accounting system, or you can manually keep all of the records. If you ask your bank, they will let you have online access to your account to see all of the transactions you’ve made. That way, you can easily compare the records from your bank with the records from your own list.
Some businesses start a bank reconciliation statement to keep a formal record of when they have regularly reconciled their accounts. You can choose when you want to review your account. Follow a schedule that works best for you.
What Would Happen If the Records Don’t Match?
Don’t worry too much if there are minor differences between your internal records and your bank records. The timing can be different, so your bank statement might not have been updated yet.
For example, with outstanding checks, you might not see any reductions to your balance until the check has been processed on your account. You won’t see the difference in your balance if the check has not been deposited yet. With automatic electronic payments, it might not show up on your account immediately, but it will show up near the end of the month or the following months.
Nevertheless, there’s no problem as long as you can easily explain the differences on your account. If there is no clear explanation for the dissimilarities on your account, that’s the time where you have to report and have it investigated by your bank. It’s important to regularly do bank reconciliation to prevent bigger problems in the future.
How Often Should I Reconcile My Accounts?
It is advised to conduct a check-up on your account at least once a month. However, if you’re a large business that does quite a lot of transactions, you should review your account more often because of fraud risks. You can ask your bank to help you protect your account. They will suggest all the possible solutions they can offer.
Conclusion
Bank reconciliation is important to regularly monitor your transactions and keep them safe from fraudulent actions. It is not a very complicated process because all you have to do is compare and match your records, but if you need help, you can ask for assistance from your bank or from a bookkeeper.
If you need assistance with your bank reconciliation process, you can always ask for assistance from a bookkeeper. Here at Totally Booked, we offer services that will make your business’s financial part easier. We handle bank reconciliations, custom reporting, payroll, sales tax, and more! If you need a bookkeeper in NYC, contact us today!