What does a company want at the end of every month?

That what stays in their business bank account at the month end aligns with their spending or earnings that month. 

Ideally, it should be like this, but does it happen every time?

A mismatch between your business accounts and records may result in overdrafts or fines. 

That’s when bank reconciliation can help. 

Yes, bank reconciliation may not be something you like to do, but it’s crucial for business. 

You can relate to this if you’re running a business. 

What is Bank Reconciliation?

Bank reconciliation is the process of comparing a company’s bank statement to its financial records. 

It balances out discrepancies between the bank’s reports and the company’s books.

Adjustments must often be made and documented on the company’s end to reflect inconsistencies in the records.

There are two important terms that you must know: “outstanding checks” and “deposits in transit.”

    • Outstanding checks are the checks from the company that has not yet cleared.

    • Deposits in the route are the deposits from the company made too late to be reflected on the bank statement. 

The company may also need to make changes for service or maintenance charges received from the bank but not yet reported.

Bank Reconciliation Example with Mentioned Adjustments

Bank Rec. Example

The business will first record the amount of the adjusted bank statement, accounting for any outstanding checks and deposits in transit.

    • $7,450 – $3,000 + $1500 = $5,950

The company will then adjust its books to reflect the service charges from the bank:

    • $6,000 – $50 = $5,950

Adjusted bank statement = $5,950

Adjusted company books = $5,950

Importance of Bank Reconciliation

Bank Reconciliation Helps in Keeping Track of Your Spending

Track Spending

Bank reconciliation helps you could find areas where your company is overpaying. For instances 

    • You may have current subscriptions that you no longer require.
    • You may find that the price of services or goods has gone up over time. So, it would be in your company’s best interest to look for a less expensive alternative.

You can track spending and see where you can do cost-cutting by comparing your business activities to your accounts.

They Help in Fraud Detection 

Fraud Detection

Although reconciling your bank statements won’t prevent fraud, it will alert you when it does.

It makes fraud detection easier. For example, 

    • A vendor could accept a check as payment, but they might manipulate it to increase the amount withdrawn before cashing it. You’d have no idea until the bank charged your account. When you compare your bank statement, the disparity will become apparent.
    • Employees could be utilizing their expense accounts for non-work-related expenses. 

Gives A Reality Check to You About Your Business Health 

Reality Check To Business

Your books should accurately mirror reality when you look at them. If there are discrepancies in your bank account, credit card bills, and accounting, you risk spending money you don’t have.

It can also help you find any bank service fees or interest income ensuring your company’s cash balance is accurate.  

Small company owners may be ignorant of deficits if they do not take the time to reconcile their bank statements. 

Although you may run your business more effectively by delegating, you must be able to monitor every aspect of it.

You may monitor your bank statements to keep an eye on your business’s health and identify changes in revenue.

They Help In Monitoring Transactions

Monitoring Transactions

If a client complains about not getting payments, it is conceivable that a check got lost in transit.

You can identify checks that have not cleared when you reconcile your bank statement monthly.

It’ll help you to find any potential missing payments. 

You can use your reconciliation statement to confirm that the amounts for your other business transactions have been calculated correctly and are proceeding. 

Why Saisystems Technology for Bank Reconciliation?

Firstly, bank reconciliation is extremely crucial for every company, be it of any size. 

    • Small-sized companies have difficulties in finding a competent bookkeeper. 
    • Mid-sized companies lack data security measures. 
    • Big corporates have to manage hundreds of global accounts, which is neither cost-effective nor feasible in-house. 

At Saisystems Technology, we offer

    • A dedicated skilled team.
    • Data security measures that ensure confidential data.   
    • Financial control for due diligence of financial statements.   

So, partner with an experienced vendor like Saisystems Technology to ensure exceptional outcomes without the added expense of running a back office.

 Also checkout this Case Study on Bank reconciliation for better understanding about us. 

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