Posted by Common Cent$ Bookkeeping and Tax Preparation

Importance of Bank Reconciliations

Importance of Bank Reconciliations

Every organization needs to go through the bank reconciliations especially before the tax season arrives because it is essential to balance the cash inflows and outflows for smooth processing of the taxes. Bank reconciliations let you match the accounts of the business with the records regarding cash and the bank statement. An accountant can work the best for this job so if you are not sure how to do it; then it is better you hire an accountant to do the job for you perfectly. 

Accountants know their job, and they do not share the information of the company once they are hired with one firm. They match the accounts with the bank statements to keep the check and make sure that both sides are equal without any manipulations. As an owner of the business, you have to work with the accountant and understand the importance of bank reconciliations here are some of the reasons why you need to do the reconciliations. 

Importance of Bank Reconciliation 

  • It is always better to do the reconciliation once in a month to maintain the records of the organization and to stay updated with fixing any errors at the same time without delaying it. 
  • Each transaction which holds the business activity should match the bank statement whether regarding cash or the debit/credit payment. The records should match manually with the register maintaining the accounting of the company. The bank statement needs to show the amount which you are aware of. When you are sure about the amount which is in your account, you will be satisfied with the bank reconciliation easily even if any errors arise during the process. 
  • When you are filing taxes, it is essential that you are aware of all the business activities, spending and earnings, so you have to go through the bank reconciliation process with the accountant while it is being done once a month. Even if an error occurs when you can define it easily when you know all the information which gets processed. 
  • When you get into the regular process of bank reconciliation, you can pick out the errors easily by remembering them fast as well. If you do the process once in six months, you would not remember when and how you did any transaction which will make it complicated for you and eventually you will panic at the end. 
  • Sometimes, there can be an error from the side of the bank which you can analyze and fix it instantly when you maintain the bank reconciliation once in a month. You can catch any fraud which may occur due to check signing, money deduction out of the account, unauthorized access to the accounts, transfers and much more. 
  • It helps you in preventing in falling into big problems for the future of the company. You can easily identify the issues and fix them by evaluating the cash statements matching with the bank statements. You have enough time to sort out the issue when you look at it once a month. You can keep track of the cash, checks, transfers, payments, errors and maintain a proper accounting system with tracking it. 
  • For the large businesses, it is essential to reconcile once a month because of the huge and big activities which occur in the account. You would not know about the fraud in the accounts unless you look into it yourself with the accountant. 

Once you are sure and have the proper track of each transaction, you will be able to file the taxes without any hassle with mentioning all the activities without any discrepancy with the true source of earning. So make sure to pick out one day out of the busy schedule and get together with the accountant to learn about all the processes of accounting, so you do not have to face any loss in the competitive market. 

Common Cent$ Bookkeeping and Tax Preparation
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