Proper reconciliation of bank statements is vital for any small business. I have recently been working with a client who has not reconciled for well over a year and needless to say it's a bit of a mess. Even if you don't have an accountant on staff, this procedure must be done monthly. Whether you use financial accounting software such as QuickBooks or you simply keep track of your bank records, double-check that everything adds up.
Even if you implement strict control measures, the potential exists for human error in accounting. If companies fail to reconcile their bank statements every month, these errors may go undetected and they could be costly. For example, if a teller at the bank calculates a deposit incorrectly, the company may end up short of the funds it needs to continue to doing business. The reconciliation process helps provide a double-check to stop mistakes.
Following Up on Transactions
If clients are complaining about not receiving funds, it could be possible that a check was lost in route. When you are reconciling your bank statement every month, you can catch checks that have not cleared, and this will help you track down any potential missing payments. In addition, you can use your reconciliation statement to make sure your other company transactions are going through and have been calculated for the proper amount.
Keeping a Close Eye on Company Performance
When small business owners do not take the time to reconcile their bank statements personally, or at least see an overview of the results, they may be unaware of potential income issues or shortfalls. While delegating can help you manage your company better, you need to be able to see exactly what is going on within your company. Keeping an eye on bank statements can help you keep your finger on the pulse of your company and spot income fluctuations.
When bank statements are not monitored and reconciled, the potential for undetected loss is high. Not all employees or accounting firms are honest, and you may not miss money that has been taken for some time. This is how some employees are able to embezzle thousands if not millions of dollars over time. Reconciling your bank statement helps you prevent losses and may indicate a potential problem in your accounting system.
Your Numbers Guy is here to help!
With decades of experience in finance, supply chain, and process improvement I too have ventured into the world of small business and self-employment. My ultimate goals are to offer my experience and skills to entrepreneurs/small business where you have access to a professional CPA at affordable rates. At the basic level bookkeeping & accounting is available but the services we offer are much more than that.
I would look forward to having a conversation with you. Let's meet!
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