Fundamental accounting processes are often practiced in organizations to ensure transparency and accountability. Keeping a book of money entering or leaving your organization during a fiscal period is necessary. Bank statement reconciliation is an essential accounting practice that allows you to monitor fraudulent activities during a particular period. Companies can also prevent financial statement errors with these statements. As a wise business owner, you should reconcile your statements regularly to ensure transparency. This post will explain why you should reconcile your bank statements each month. Keep walking with us to learn more!
Importance of bank reconciliation statements:
A reconciliation statement will ensure that the amount spent matches the amount shown leaving an account. Businesses and individuals perform reconciliation regularly – preferably monthly – to avoid fraudulent activities. Being a part of normal accounting procedures, accountants should pay attention to it to ensure transparency at each level. Talking about the importance of bank reconciliation, you will find multiple points as you go down the road. We have compiled a few useful points to help you emphasize your reconciliation activities. Let us start without further discussion!
1. It helps you track receivables:
Companies often have customers who deal mostly in checks rather than cash. It is common that these companies often forget or misplace checks, creating a problem in collecting receivables. What is the best remedy to deal with this problem? Reconciling your statements will help you track your receivables and keep a fine record of transactions.
You probably would have added the receivable in your books but not your bank account. The best you can do is to reconcile your bank statements and clarify the books/accounts. Does it sound too complicated for you? You can opt for accounting and bookkeeping services in Dubai and let these experts help you!
2. It helps you identify fraud:
When reconciling transactions in your bank account, you should look for fraudulent activities or signs. Various activities will give you a suspicious feeling, like unauthorized money transfers or unauthorized issuance of checks. Companies can correct such problems with periodic reconciliation statements, especially in saturated times.
You can spot anything that does not match up on your company and bank records. The difference will highlight fraudulent activities, and you can track the moment it was committed. Sometimes, you will realize that you have forgotten to record a transaction, which will solve the difference. However, that does not fall under fraudulent activities.
3. It helps you prevent mistakes:
There is always a margin of human error, which can lead to big differences in accounts. No matter how meticulous your accounting system is, it is always prone to mistakes. The best to ensure minimum mistakes is to reconcile your bank statements monthly and keep things in good shape. A few common mistakes that you can find in accounting systems are enlisted here:
- Double payment
- Lost checks
- Missed payments
- Simple arithmetic errors
Digital finance transformation is something modern businesses invest in, but there is a simple technique to try. Reconciling your bank statements might solve the issue. With this procedure, you can quickly identify and rectify your mistakes, no matter how grave they are.
4. It keeps accounting in good standing:
Bank reconciliation statements allow you to monitor your company’s balance closely. This way, you are less likely to spend money you don’t have in your account. What if you overdraw or miss a payment due to a lack of knowledge of your cash? Your credit score will experience negative remarks, leaving your accounting standards in bad shape.
Bank reconciliation statements can help you save money, as many banks often impose overdraft fees. You can also notice if your bank starts charging you a new fee, allowing you to enquire about the reason.
5. Accurate financial statements:
What if your bank has committed a mistake while recording your transactions? It is rare, but it happens sometimes, and you should closely monitor it. They will question the accuracy of your financial statements, but you can validate your financial statements thanks to reconciliation statements. Once the reconciliation is done, your bank will accept the mistake with an apology, and you can stand firm on your financial statements.
Your calculation is right when your bank reconciliation statement matches your financial statements. However, creating these statements is never easy, as it can test your nerves. Why not opt for accounting and bookkeeping services in Dubai and let professional accountants help with your job? It sounds wise!
Enhance your accounting practices with professionals!
Accounting practices are necessary for the smooth operations of your business. You can identify and rectify mistakes to ensure a transparent accounting system within your company. However, it will never be possible without professional accounting firms on your side. Call these experts today and let them take your company to new heights with professional accounting practices and techniques!