Bank reconciliation is a process that explains the difference between a balance displayed in an organization’s bank statement, as provided by a bank, and the corresponding amount that appears in an organization’s own accounting records at a particular point in time.
Organizations can reconcile an accounting difference by summarizing each transaction in the bank statement and an organization’s cash book. However, it is a very tiring and time consuming job. A service provider takes care of end-to-end bank reconciliation services.
Some of the common accounting errors that occur during voting are, a check or list of checks issued by an organization that is not presented to a bank, differences in bank transactions such as credit received or an additional fee imposed by a bank, has not been recorded in the books of an organization and so on. To overcome or resolve such failures, entrepreneurs need an expert to handle their bank reconciliation functions. They make the necessary changes to the money book and the differences are recorded to help an entrepreneur with future polls.
Reconciliations are conducted by dedicated accountants using advanced software. It is important to understand what mistakes can occur and how to remedy them for a successful reconciliation.
Bank reconciliation services help to review an organization’s bank balance according to their own records and balances issued by banks. This service also helps to correct items that cause a difference between the two balance sheets. Timely voting allows companies to identify and prevent intentional fraud along with finding mistakes made by bank representatives, accountants, employees and management. Although bank reconciliation is usually a procedure by the end of the month, organizations with less cash resources may also conduct the process weekly (if needed).
What are the benefits of reconciliation services?
Using the bank reconciliation process, an organization matches its distributed checks with the amount or record specified in bank statements. A vigilant review, based on correct sheets and procedures, helps reveal fraudulent activities such as payments made for fraudulent business purposes, payments transferred to illegal employees or unauthorized vendors, and not to revise sanctioned checks and details.
The holding time between cash flow to suppliers and employees, as well as payments from customers and customers, can vary widely. This particularly affects an organization with very low liquidity reserves. Regular bank reconciliations help entrepreneurs manage or defer payments that can protect organizations from bank overdrafts, denied checks, insufficient funds and additional interests.
Identifies bank failures
Bank representatives may make accounting errors such as transferring incorrect amounts, registering incorrect checks, entering the amount in an incorrect bank account, omitting an entry from an organization’s bank statement, or registering a duplicate transaction. Reconciling bank accounts gives entrepreneurs time to notify a bank of their mistakes, allowing them to find the difference and correct the mistake.
Bank reconciliations allow organizations to handle their receivables better. When a customer’s payment is cleared from a bank, the receivable no longer remains outstanding and therefore requires no further action. However, if a client’s control is not cleared, it warns management to be more focused in its collection process.