Blog

A bank reconciliation statement is prepared at the end of the month. The entries in the statement stop being the cause of discrepancies after a few days. The need and importance of a bank reconciliation statement are due to several factors. First, bank reconciliation statements provide a mechanism of internal control over cash. The bank reconciliation statement explains the difference between the balance in the company’s records and the balance in the bank’s records. Nowadays, many companies use specialized accounting software in bank reconciliation to reduce the amount of work and adjustments required and to enable real-time updates.

Small businesses undergo external audits to provide external business stakeholders with a third-party opinion on the company’s financial health. Business owners are usually required to provide auditors with several months of bank reconciliations for audit purposes. HighRadius Autonomous Accounting Software enables faster financial close and accurate reconciliation of bank statements and general ledger (GL) and sub-ledger. Using AI-based anomaly detection, save your teams from manual work during month-end close. It’s a good idea to use a dedicated bank account just for your business. That way you know all the transactions on your bank statement are business related, and should appear in your business accounts.

What Is Bank Reconciliation?

Funds should not have a negative cash balance in the accounting records. Any negative cash balance in the accounting records should be resolved with an interfund loan as described in BARS Manual 3.9.1, Loans. Once the balances are equal, businesses need to prepare journal entries for the adjustments to the balance per books.

Doing so will help improve your business’s overall procurement process management and ensure its success in the long run. In this step, you will compare your cash book and internal accounting records with those on the bank statement. Look for any differences in amounts, dates, or checks that have been written but may not appear on the bank statement. Business owners use bank reconciliations to verify why business checks were not cashed by the intended recipient.

Manage Bank Reconciliations With NetSuite

In such a case, you simply need to mention a note indicating the reasons for the discrepancy between your bank statement and cash book. At times, your business entity may omit or record incorrect transactions for cheques issued, cheques deposited, the wrong total, etc. Therefore, you record no entry in the business’ cash book for the above items. When your business issues a cheque to its suppliers or creditors, such amounts are immediately recorded on the credit side of your cash book. One of the primary reasons responsible for such a difference is the time gap in recording the transactions of either payments or receipts. After adjusting all the above items what you get is the adjusted balance of the cash book.

Our cloud software automates critical finance and accounting processes. We empower companies of all sizes across all industries to improve the integrity of their financial reporting, achieve efficiencies and enhance real-time visibility into their operations. Nowadays, there are many payment management software that automates processes to save companies a great deal of time when it comes to bank reconciliation. Read this post to the end to see how Uelz can help you have an accurate bank reconciliation. Moreover, proper bank reconciliation helps businesses save time and money by eliminating future accounting mistakes and reducing the need for audits.

What do you mean by bank reconciliation?

Once you post the journal entries into your company ledger accounts, make sure that the cash account balance is equal to the adjusted balance per cash book shown in the bank reconciliation statement. Reconciling bank statements with cash book balances helps you, as a business, The purpose of a bank reconciliation to know the underlying causes that lead to such differences. Once the underlying cause of the difference between the cash book balance and the passbook balance is determined, you can make the necessary corrections in your books of accounts to ensure accuracy.

The next step is to adjust any debits and credits in the general ledger—like bank fees and interest earned. As you do this, note and investigate any differences and give specific explanations for each. Ideally, you should perform bank reconciliation at least every month—especially if you do your bookkeeping yourself. A regular schedule ensures your unreconciled statements don’t pile up into a tedious, time-consuming task. Similarly, if a businessman deposits any checks on the last day of the month, these cheques may be collected by his bank and shown on his bank statement three or four days later. Similarly, some checks credited to the ledger account will probably not have been processed by the bank prior to the bank statement date.

If you recently attended webinar you loved, find it here and share the link with your colleagues. World-class support so you can focus on what matters most.BlackLine provides global product support across geographies, languages, and time zones, 24 hours a day, 7 days a week, 365 days a year. We are here for you with industry-leading support whenever and wherever you need it. Accelerate adoption and drive productivity and performance.One of the critical success drivers for any software technology is effective user training and adoption. Whether you are deploying for the first time or creating a sustainable education program for maximum value creation, explore how you can take the next steps to upskill your users.

Such cheques are the ones that have been issued by your business, but the recipient has not presented them to the bank for the collection of payment. It is important to note that it takes a few days for the bank to clear the cheques. This is especially common in cases where the cheque is deposited at a bank branch other than the one at which your account is maintained.