Reconcile your bank accounts

Bank reconciliation is an inevitable part of your journey as a small business owner. It involves comparing the transaction and balances on your bank provided statements to your the transaction and balances in your bank ledger.

The main reason for reconciling your bank statement is to make sure that the balance of your business and the balance of the bank agree. Here are six reasons why you need to reconcile your bank statement each month:

1. Validate Data Entry

Missing transactions, transposition errors, or adding an extra number by accident can cause the cash balance on your books to be too high or too low. By comparing your bank statement with your records, you can catch errors made.

2. Confirms Accuracy of Financial Statements

Confirms that your financial statement matches that of the bank. Maybe the bank made a mistake.  Rare but it happen.

3. Accurate Tax Reporting

Reconciling your bank statement is essential for you to generate a correct tax return.

4. Enables you to monitor cash flow.

5. Spotlights any irregularities between your financial statement and bank statement such as an outstanding check or electronic transfers.

6. Detect fraud before it’s to late.

Reconciling your bank account can help you to flag unauthorized transactions.   Your bank account may have been used to pay someone else’s bills online or perhaps a check amount was changed by an employee or vendor. Fraudulent transactions can add up over time and cost you a lot of money if they aren’t caught early.

If you have any questions or need help reconciling your accounts, contact us. We would be happy to help.