Bank reconciliation is the process of systematically comparing an organization's internal financial records with the bank's statement to ensure accuracy and consistency. Essentially, it helps identify discrepancies, such as bank errors, overlooked expenses, missing deposits, or unauthorized transactions.
Performing a bank reconciliation typically involves several key steps:
Reviewing bank statements: Start by carefully analyzing each transaction on your bank statement and compare them with your internal financial records.
Matching transactions: Identify and verify transactions listed in the company's books against those appearing on the bank statement.
Investigating discrepancies: Spot and resolve differences, whether stemming from timing issues (like outstanding checks) or human mistakes.
Reconciling differences: Update company records with adjusted entries, correcting errors and fresh information discovered during the reconciliation process.
Regular bank reconciliation not only ensures accuracy but also safeguards the business by quickly identifying fraudulent activities and enhancing transparency in financial management. Consistent bank reconciliation practices prevent financial misstatements, aiding in informed and confident company decision-making.
