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Why Bank Reconciliation Is Important & How It Is Used in Accounting Process?

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Why Bank Reconciliation Is Important & How It Is Used in Accounting Process?

A bank reconciliation statement is a secondary type of accounting service that isn’t the main part of the accounting process, but without a reconciliation statement accounting work isn’t complete. It is a crucial statement that helps accountants in identifying any kind of errors, frauds, and inefficiencies present in the cash statement and bank statement.

Sometimes, when bank book balance and bank’s passbook balance don’t match due to various favorable and unfavorable conditions, then it becomes very important to reconcile both the statements so that the cause of difference can be identified. At CapActix, we always recommend our clients to use bank reconciliation services so that they can eliminate any sort of error and fraud in their books. Even if you have to outsource banks and cards reconciliation services, then you should go for it without any hesitation.

How Bank Reconciliation Accounting Performed?

Bank reconciliation accounting is a very critical job that needs to be performed carefully without any unbiased judgment. To create a reconciliation statement, companies need to compare their internal bank records with the bank passbook. It might not be necessary to make a reconciliation statement if your bank and internal bank statement show the same balance, but if the same balance isn’t shown, then the reason behind the same need to be located soon.

In the bank reconciliation process, accountants have to carefully match each entry and note down all the fishy entries so that they can analyze them later on and find out the reason behind the difference.

Importance of Bank Reconciliation Statement

Business bank accounts receive less protection than consumer accounts under federal law, so businesses need to stop problems quickly. And, to identify the problem from the very beginning and rectify instantly, business organizations need to reconcile their bank and cash statement on their own as banks won’t do anything.

So, it is very important to run a proper reconciliation process and even you should hire Bank account reconciliation services to help you out. By using reconciliation outsourcing services can let you experience the humongous benefits that can prevent your business from huge losses such as:

Helps in Catching the Frauds

In big corporate business organizations, where multiple people have access to the company’s bank account and power to deposit or withdraw cash – it gets very convenient to commit fraud. Moreover, because of the vast size of an organization – it becomes next to impossible to detect small cash frauds unless a complete bank reconciliation statement isn’t created.

With this one statement, accountants can catch several frauds before it gets too late like – is check issued on company’s name tampered, is check issued without proper verification, is any amount withdrawn from the account without proper authentication, does account has any missing deposit entry, etc.,

In a company, various fraud situations arise for instance – if a manager asks the clerk to withdraw $100 for petty cash, but the clerk tampers with the amount and makes it $1000. This small error won’t be detected unless a proper reconciliation statement isn’t made. Plus, if employees know that the company reconciles accounts periodically, then they won’t even dare to commit fraud.

Avoid Administrative Problems

With the help of bank account statements, business organizations can identify administrative problems involved with their current record-keeping system and rectify them. This will help in deciding how you handle cash flow and accounts receivable, or perhaps change your recordkeeping system and the accounting processes you use.

Banks and cards reconciliation services make sure that administrative workflow is always on the spot by ensuring – you know how much amount you have in the bank account, reducing the chance of check bounce, being fined from the bank for insufficient balance, catching bank errors, checking the status of customers payment and so much more.

Keeping an Eye on Bank Fees & Interests

Every month bank charges numerous penalties and fees from your bank account instead of the services provided or errors committed by you. You might have to pay overdraft fees or you might have earned interest on your savings account that you need to record. Moreover, if you have availed some services from your bank, then you have to pay fees for that as well as like you requested the bank to stop payment of certain check so you have to pay to check cancellation charges in this case. All these bank entries need to be added or subtracted from your cash book so that the balance of both books remains the same.

Here you can read What is bank reconciliation? 8 reasons to reconcile monthly to aid in establishing a sound internal control system

Track Payment Received

One of the important parts played by the bank reconciliation statement in the accounting process is to ensure that all the payments have been received or not. Sometimes, when the accountant submits a large number of checks into the bank, then a check might be left behind to deposit or if the check is submitted on the last date of a month, then its entry will be made by the bank in the next month.

Moreover, if one of your customers hasn’t cleared your payment yet, then all that can be easily tracked down by comparing two books thoroughly.

Update Transaction Status

It is a very common situation where you have issued a check to your vendor, but he hasn’t deposited it for a few months. This will be going to make your book’s balance clash. So, to track down the status of your last month’s payments received and made – it is useful to reconcile and update the status of your transaction.

How to Get Flawless Bank Reconciliation Services?

It is clear from the importance of bank and card statements that every business needs to perform these services to stay fraud and errors free. But, to get the real impact of bank reconciliation services, it is important to have an unbiased person to create a statement. Thus, you should use bank reconciliation outsourcing services to get the perfect bank reconciliation statement.

When you are searching for the best banks and cards reconciliation companies, then you can’t overlook the services of CapActix. To know more about our bank reconciliation services, contact us by email – [email protected] or can call on +201-778-0509.

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