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accounting bank reconciliation service business thumb - Bank Reconciliations, why are they necessary?

Bank Reconciliations, why are they necessary?

The process of comparing your bookkeeping records (on paper or in accounting software) with the statement provided by the bank for the same period. This allows you to can identify differences and discrepancies in your accounts.

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There are three compelling reasons to perform monthly bank reconciliations for your company!

1) Track and Verify Cash Flows

Checking your bank statements allows you to see the relationship between money coming in and going out of your bank account. This in turn enables you to plan collection and spending decisions. As a result, bank reconciliations allow business owners to be aware of the exact cash position.

Another case when bank reconciliations are useful is when lenders and investors are involved in business decisions. This helps to identify the actual amount of money you are holding in your banks, saving you from troubles of overdrawing money or holding money which could otherwise be invested.

2) To Detect Errors

a) Bank Errors – This occurs rarely, however banks can make a mistake. Thus, verifying with your accounting books can allow you to claim funds, which are missing. This can be done by speaking to the respective employee in the bank.
b) Accounting Errors – There are several kinds of mistakes including sales receipts not entered and incorrect amounts entered. If these mistakes pile up every month, it could lead to inefficient accounting and cause a snowball effect. For instance, the company having to pay sums to creditors not entered in the accounting books. As a result, this could even lead to cash deficits.

3) To Detect Fraud

For example, if your supplier, after given his payment by cheque, might withdraw larger than agreed amount of cash. This can be easily detected if bank statements are reconciled.

This could be helpful in other situations too, for example, if business partners withdraw more money than actual expense for business or petty cash. Or for instance, employees steal cheque and withdraw money from company bank account.

Therefore, a regular monthly bank reconciliation method is proved to be an effective tool for business owners and accountants, to identify problems and gain an understanding of financial position.

Quick Accounting Services’ accounting systems make reconciling bank and credit card statements fairly easy, so contact our team on ismail@qasdubai.com and ask our bookkeepers about implementing this procedure as soon as possible!

Quick Accounting Services Dubai
Phone: 0507355095

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