No matter if a business is big or small, reconciling the bank statements every month is crucial for a company. A bank reconciliation statement compares the bank balance as mentioned in the business accounting records along with the balance that is shown in the bank statement. Due to the difference in the timings, it is normal to see a difference in both the records. Few transactions might be accounted for in the bank before it is incorporated in the business books. These differences could result in variation. However, below are a few reasons listed out that explain why businesses should reconcile their bank statements every month.
Why should businesses reconcile their bank statements every month?
- Avoid errors
Though a business has implemented strict control measures to its accounting processes there are chances for human errors. Reconciling the bank statements with the balance mentioned in the books helps detect these kinds of errors. Errors not detected or solved result in a loss for the business.
- Monitor your cash
The most vulnerable asset in a balance sheet is cash and bank reconciliation provides the most effective mechanism to protect cash as it uncovers irregularities. One such mechanism would be to segregate the duties of individuals who are responsible for authorizing bank withdrawals and preparing and monitoring the BRS.
- Keeping a check on the business performance
Scheduling a time to personally reconcile the bank statements will help you find income issues or shortfalls if any. Assigning the task will help you get it done on time but it is recommended for business owners to keep an eye on what’s happening in the business. Hence, it is better to either prepare the bank reconciliation yourself or check the statement in detail after a professional has prepared it for you.
Track your business performance. make sure you prepare a bank reconciliation statement every month. If you find it difficult to handle it yourself Park Intelli’s financial experts are ready to give you a hand.