Definition of a Bank Reconciliation
A bank reconciliation is a process which compares a company’s bank statements with its financial reports using a bank reconciliation statement.
Importance of Bank Reconciliations
Ultimately, bank reconciliations ensure that all payments have been processed and deposited properly. A bank reconciliation statement also helps identify whether any bookkeeping changes are needed, such as double payments, calculation errors, or missed bank fees. Since bank reconciliations are completed on a regular basis, they also provide a great opportunity to review financial statements and reports for bigger issues, such as fraud.
Bank Reconciliation Tips
- It is recommended to perform a bank reconciliation each month to ensure that your statement and reports remain up to date
- Don’t forget the cash account. Pay close attention to potential errors such as bank service charges.
- Make sure the balances equal out at the end. If your balances aren’t equal, start the reconciliation again.