To be a successful business person, you can’t just focus on providing quality products and services to your existing customers, you also need to keep an eye on your finances. There has to be proper checks on all financial transactions taking place, ensuring that the funds of the company are not being misused.
One of the best ways to keep track of your business finances is a bank reconciliation statement. This is an important financial document which helps you to safeguard your business against any fraud committed by any external or internal source.
The purpose of the bank reconciliation statement is to compare the internal financial transactions as per your books of accounts with the bank statement, to detect any discrepancies. These discrepancies or differences could be due to accounting errors or fraud. Whatever might be the reason, your business is losing money, and you need to rectify the problem immediately.
These statements are prepared on a monthly basis, and errors are detected and reported immediately. You are also able to take action as and when required with a bank reconciliation statement.
Banks provide statements either on a quarterly basis or on a monthly basis, and you can get your bank statements online.
Here are some reasons why a Bank Reconciliation Statement is required:
When you reconcile the transactions in your books of accounts with bank statements, it helps to detect fraud like differences in amounts issued by checks or checks which are issued without the permission of the required authorities.
A bank reconciliation statement also helps you detect transfers or withdrawals of cash which are not authorized by you. You could also check whether all the deposits made by you are reflected in the bank statement or not.
You cannot issue checks to your suppliers and vendors without knowing the cash balance in your bank. If you do, then your check will bounce, and the vendors might stop supplies. You cannot track deposits being made by the company without a bank reconciliation statement.
There could be lapses due to internal administrative problems or errors committed by the bank. You would also have to bear additional costs like bank charges for not having the minimum balance. You can also determine if customer payments have been credited on time or not. If a customer payment has been rejected by the bank, you can follow up with the customer to ensure prompt payment.
So this statement is important to maintain cash flow.
The frequency at which a bank reconciliation statement should be prepared depends on the nature of your business. If your business has a high number of transactions and many employees, then a monthly reconciliation would be advisable.
On the other hand, if there are weekly transactions and a few employees, then you could reconcile the internal books of accounts with the bank statements on a quarterly basis.
You prevent the risk of financial emergencies with a bank reconciliation statement. You will not have to use additional lines of credit to help you tide over a financial crisis and pay additional interest. Not reconciling the internal records and bank statement could lead to an inability to pay your employees on time and in extreme cases, be insolvent.
When reconciling your books and records with the statements provided by your financial institution, you should use a Bank Reconciliation Statement. In addition to this, it can assist you in locating unauthorised monetary transactions. Insolvency and the inability to make timely payments to employees are two potential outcomes of failing to reconcile.
When you keep a check on payments received from and payments made to suppliers through a bank reconciliation statement, you know your cash flow position at any given point in time. You will prevent the bouncing of any check issued by you and take immediate action if any check issued by the customer fails. With timely payments made to internal employees and vendors, your business image also receives a boost.
The process of how bank reconciliation works is the process of making sure that all the data in your company’s financial records is accurate. Reconciliation can be done by either an accountant or a finance professional. There are certain steps that one should take to get the most out of their account reconciliation process flow.
The first step is to make sure that you have a clean and accurate accounting system. This means that there should not be any discrepancies in your accounts, such as incorrect account numbers or missing transactions. The next step would be to make sure you have enough detail in your records, so you can determine whether a transaction has been recorded correctly or not. The last step would be to review the reconciliations and make adjustments if necessary.
Every small business needs to reconcile their books. Reconciliation is the process of matching up two sets of numbers to make sure that they are in agreement with each other. The reconciliation process is a time-consuming and tedious task, but it is vital for small businesses.
OHI’s Reconciliation Services is an online service that provides small businesses with a complete reconciliation of their financial accounts. The service can be used by any type of business, regardless of size, and takes no more than five minutes to set up.
OHI offers reconciliation services that are designed specifically for small businesses. They have a team of experts who can help you save time and money by taking care of your bookkeeping needs.
Performing a reconciliation ensures that all of the information in your company’s financial records is correct. An accountant or financial expert can perform the reconciliation. Monthly financial statements are prepared, and any discrepancies are notified immediately.
Rectifying financial records is a must for any enterprise big or small. When two sets of numbers are reconciled, they are compared and checked for consistency. Rectifying financial records is a difficult and time-consuming procedure, but it’s essential for organisations of any size. OHI’s online reconciliation solution can be up and running in as little as five minutes.
OHI is a specialized finance and accounting outsourcing service provider with over fifteen years of finance and accounting outsourcing experience. We have strong functional outsourcing expertise in end to end accounting processes covering daily accounting activities, reconciliations, month end and year-end account finalization processes, employee reimbursements, payroll processing, management reporting and financial analysis.
OHI serves close to 300+ clients across USA, UK and Canada. We invite you to experience finance and accounting outsourcing through us.
Contact us for a customized NO OBLIGATION proposal for outsourcing your accounting activities.