Why Bank Reconciliation is Important for Small Businesses

Bank reconciliation may be a method of matching the balances in associate degree entity's accounting records for a brokerage account to the corresponding data on a financial statement. The goal of this method is to find the variations between the two and to book changes to the accounting records as applicable.

The purpose of bank reconciliation is used to compare your records to those of your bank, to see if there are any differences between these two sets of records for your cash transactions.The result could be an overdrawn bank account, bounced checks, and overdraft fees.

As a small business owner, you should be reviewing your monthly banking statements each month to make sure that funds being withdrawn and deposited into your account are correct to prevent bank errors and detect potential fraudulent activity.

When you reconcile your business account, you assess your internal monetary facts towards the data provided to you by your bank. A monthly reconciliation helps you find any unusual transactions that might be caused by fraud or accounting errors, and the practice can also help you spot inefficiencies.

Reason to conduct bank reconciliation:

•  Identifies Bank Error: The most common occurs when the bank records an incorrect amount on your bank statement. You should always notify your bank of any discrepancies that you come across during the bank reconciliation process.
•  Prevents Overdraft: any banks offer overdraft protection but this comes at a fee. By conducting bank recon on a consistent basis, you’ll know exactly how much you have in your account thereby reducing the potential for overdrawing.
• Detect Fraud: Bank recon suit a company’s allotted tests with the cleared assessments on the company’s financial institution statement, a cautious review based on appropriate controls.and techniques helps to show fraudulent activities. Examples include unauthorized payments to employees and vendors.
• Permits You to Forecast Like a Pro. The capacity to supply projections in your small enterprise is an exceptionally powerful device. As nicely as having accurate statistics is a vital beginning indicate accomplishing that goal.
• Following Up on Transactions:If shoppers are protestant regarding not receiving funds, it can be attainable that a check was lost in route. Once you are adaptive your financial statement monthly, you'll be able to catch checks that haven't cleared, and this can assist you hunt any potential missing payments. .
• Company Performance:When small business does not take the time to reconcile their bank statements personally, they may be unaware of earnings issues or shortfalls. While delegating will let you manage your agency better, you want so that it will see precisely what goes on inside your enterprise. Keeping a watch on financial institution statements allow you to hold your finger on the pulse of your employer and spot earnings fluctuations

Bank Reconciliation in QuickBooks online bookkeeping Software

Step 1: Click the Gear icon-Tools-Reconcile

Step 2: Choose the account you need to reconcile. In general, you’ll best want to reconcile your bank & credit score card statements.

Step 3: Enter the Ending balance and Ending date. This refers to the number of cash you had in your bank account or that you simply owned on your MasterCard at the tip of the statement amount, severally.

Step 4: Hit -Start Reconciling.

Step 5: Compare balances

Reconciling bank statements creates a experience of calm and balance. For others, it makes DIY bookkeeping that much more stressful. If you’re in the latter category, it may be time to think about hiring a Quick Books Pro bookkeeper who will do the reconciling for you.