The Importance of Reconciling Your Bank Statements

Proper reconciliation of bank statements is important for any small business.  Reconciling statements is a procedure that should be done on a monthly basis.  Reconciling bank statements does not just refer to checking and/or savings accounts.  Loans should also be reconciled to ensure the proper amount is being applied to the principle and the interest.  There are several reasons bank statements should be reconciled on a monthly basis.  The following briefly touches on a few reasons reconciling has its benefits.

Catching Errors:

Reconciling bank statements serves as a great way to double check yourself as well as bank tellers.  For example, if a teller at the bank calculates a deposit incorrectly, your company could end up short of the funds needed to do business.

Following Up on Transactions:

By reconciling accounts every month, you are able to catch checks that have not cleared, which can help track down any potential missing payments.  Also, you can use the statement to make sure other company transactions are being processed for the correct amount.

Fraud Prevention:

If bank statements go unmonitored, or unreconciled, there is a higher chance for undetected loss.  Unfortunately, not all employees or accounting firms are honest, and you may miss money that has been taken for some time.  This is how some employees are able to embezzle large sums of money over time.

Overall, reconciling bank statements on a monthly basis provides a safety net for the assurance your money is properly taken care of.  We are all human, and unfortunately, mistakes are made.  Notice any mistakes sooner rather than later.  The amount of time spent on a regular basis could be time saved in the long run.

For more bookkeeping procedures and advice visit our Financial Learning Center.