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The 5 Best Kept Secrets of your Business’s Bank Reconciliation


bank reconciliation best practices

Running a business inevitably means having to deal with accounts to keep track of credit card accounts and bank accounts that generate statements each month, quarter, and year. It also means you’re likely familiar with bank reconciliation, the process of comparing your internal account records to the bank's records, which allows you to see whether your records match or if accounts are in balance.

Yes, every business owner (and the bookkeeper) love a perfectly reconciled account, but they may not always be in perfect balance, and that’s not necessarily a bad thing. Finding discrepancies are important red flags to indicate account issues that could quickly get out of control. Account discrepancies, can help you catch bank errors or entry mistakes, detect signs of fraud, review uncleared checks, and even help you to keep track of your cash flow.

What you already know is that bank reconciliation is (or should be) a crucial part of your business's bookkeeping and accounting processes. But here’s what you may not know about bank reconciliation.

What You Don't Already Know about Bank Reconciliation

1. Bank Reconciliation is almost worthless without Separation of Duties

We say "almost" because even without separation of duties, there are still lots of reasons to reconcile bank accounts. Not separating duties, however, means your business is vulnerable to inconsistencies, overlooked mistakes, and even worse, potential for fraud. The individual responsible for entering information (handling payables and receivables) should not be the same person who reconciles the accounts.

For example, it’s possible that your bookkeeper handling payables could pay their own phone or utility bill from the company account and change the payee's name in QuickBooks. At a glance, no one would notice, but by separating duties, a second set of eyes reconciling the account with a bank statement would help to detect that.

Separating reconciliation and AR/AP duties between different financial operations staff eliminates the opportunity for occupational fraud to go undetected within your business.

2. The More Often It's Done, The Better Data You Have

It's common to reconcile accounts as frequently as you receive account statements from your bank or credit cards, which is often monthly or quarterly. You can, however, make use of online account access to reconcile accounts more often. New customers, as well as those who have been with a bank for some time, should do this regularly. For new customers who are looking for the best bank promotions and the most cost-effective banking institution to work with, easy and seamless reconciliations might be another perk to look for.” With limited time, you probably wonder why you would want to multiply a task within your bookkeeper's monthly duties.

The primary reason for frequent account reconciliation is to keep close tabs on cash flow. Whether you use the cash or accrual accounting method, bank reconciliation reveals exactly how much cash you have flowing into and out of your business at any given moment.

More frequent reconciliations also allow you to track key performance indicators throughout the month, catch bank errors, and identify accounting mistakes more quickly to avoid overdrafts.

3. You Can Reconcile in QuickBooks

The bank-reconciling-days of ledger pages with tiny lines and wrists smudged with graphite are long-gone. With QuickBooks, you can reconcile your bank and credit card accounts electronically.

Traditionally, you’d wait to receive the bank statement in the mail or print the statement from your bank's online banking. This shows a record of each transaction in your account for a specified time period. Banks sometimes cut statements monthly, quarterly, or annually, depending on the account type.

With an online banking history, however, there's no need to wait for your bank to print statements; you can reconcile your accounts as often as you would like in QuickBooks!

  1. Now that you have a statement in hand, go to Reconcile, under the Accounting tab in QuickBooks.
  2. On the Reconcile page, enter the ending statement balance and the statement's end date (final day in the period).
  3. From the Reconcile screen, you will review each transaction, comparing the record in QuickBooks to the record on your account statement. Check off each correctly cleared item in QuickBooks.
  4. Once completed, you should see a $0 difference between your QuickBooks record and account statement. A $0 difference indicates a perfectly balanced account, with no outstanding or stale items.

Here’s a video from QuickBooks that explains the bank reconciliation process if you want to learn more.

4. It's About More Than Simple Account Balancing

Yes, everyone loves the feeling of a perfectly harmonious, well-balanced account, but bank reconciliation serves a greater purpose than locating the bookkeeping department's zen. Bank reconciliation reveals red flags that can help you detect occupational fraud, track stale or missing checks, and discover deposits that never made it to the bank.

The reconciliation feature inside QuickBooks delivers a comprehensive menu of nifty reporting features that can turn you on to issues like old items throwing your register off balance. Reports are quick to pull and review. They include, the Reconciliation Discrepancy Report, Missing Checks Report, and Transaction Detail Report.

You can also quickly search for duplicate transactions, which could raise a red flag to fraud if, for example, your bookkeeper notices a monthly bill going out more than once per month.

5. Accuracy and Consistency is key

Yes, you can reconcile your own accounts. With potentially limited time, office resources, and staff, however, you could be missing out on some major benefits of bank reconciliation that working with a professional client accounting service provider can offer.

At GrowthForce, we help our clients optimize their QuickBooks system and establish a strong foundation for account reconciliation by implementing smart, efficient, and optimized bookkeeping and accounting system, designed to accommodate streamlined bookkeeping and management accounting needs. We can help automate everything that can be automated within the bank reconciliation process to ensure low costs, accuracy, and time savings.

Our monthly reconciliation processes include a periodic review of uncleared checks over 90 days to write-off items that will never clear your accounts, ensuring balanced accounts and accurate tax reporting. By seamlessly categorizing tax write-offs with automated expense tracking, helps to provide our clients with a detailed report and summary of their account reconciliations, and they get stored in SmartVault for auditing purposes.

Benefit from Bank Reconciliation with GrowthForce

Partnered with GrowthForce, your business can effortlessly benefit from bank reconciliation. With well-established processes and automated technology, GrowthForce's reconciliation services will bring your business:

  • Fraud Detection
  • Cash Flow Tracking
  • Early Detection of Bank and User Errors
  • Stale and Uncleared Check Reviews
  • Verified Deposits and Payees
  • Summaries and Reports
  • Active Tax Preparation
  • Up-to-Date Actionable Data

With all the benefits of bank reconciliation and the risks of neglecting the task, there's truly no excuse for any business to let accounts go unreconciled.

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