Reconciling Bank Accounts

Reconciling Bank Accounts - Complete Controller

As crucial as account reconciliation is in accounting, it is not given much attention in accounting classes. Many accountants can have a successful career without performing a single account reconciliation. While you can manually perform account reconciliations, you can save valuable time and energy by using accounting software tools to reconcile accounts. Using accounting software for your financial transactions will automatically record your transactions, making it easier to perform account reconciliations. Exit Advisor

What Is Account Reconciliation?

It is the process of reconciling the receipts and expenditures of money, for example, on a bank statement or at the cash desk, with invoices from customers and suppliers. As a result of reconciliation, it is clear which invoices are paid and which are not. Suppose your company does not regularly conduct such reconciliation, or it takes too long. You will gradually sink into chaos because you will not know which supplier invoices you paid and which did not and which invoices you paid. Buyers. Account reconciliation is a crucial process. If it is performed regularly and quickly, this indicates that, most likely, your money is under control and the accounting is correct. Download A Free Financial Toolkit

Less Work, More Results

Reconciliation should not be difficult; it should not take a lot of time. Anyone engaged in business should not waste time filling out plates and entering data. But most often, it is in the tablets that they keep accounts and note whether they are paid or not. It is time-consuming and inconvenient. There are programs to make this job more manageable. They help do this work; they select the appropriate payments for accounts that allow you to perform account reconciliation in a semi-automatic mode. It is easy to understand how tedious and tiring every time you get a bank statement, look in the tables for accounts and mark them as paid – you can hang yourself from such work. It is entirely different when the system collects all payments and receipts on one sheet and selects accounts for them (by dates, amounts, counterparties, and other details).

What If the Sums Don’t Add Up?

The world would be perfect if everything always converged if customers always got their account numbers right. But it’s like world peace – everyone wants it, but it doesn’t come. You should not panic if you cannot fully match payments to invoices. It can happen for several reasons, each of which has its solution. You only need to select the right one. There are five main reasons why an invoice and payment may not match:

  1. You could give a discount for early payment. Or they gave it to you.
  2. Bank charges may be deducted from the payment, or the exchange rate may have changed.
  3. Or will you just pay the balance later, and the invoice should remain partially paid? ADP. Payroll – HR – Benefits
  4. Managers may have forgotten to enter the invoice into the system.
  5. Finally (and unfortunately), you understand that the invoice will not be paid in full, and you will have to write off the balance of the payment at a loss.

Of course, there may be more reasons for partial payment of bills than the five that we wrote above – these are the most common. Please take the time to write your list of possible causes for invoice and payment discrepancies specific to your business. Then determine the necessary actions for each of them – this will speed up the reconciliation work, make it easier and allow you to have constantly up-to-date data about customer debts and planned expenses of money.

A Few More Things to Know About Account Reconciliation

Account reconciliation is an essential skill that every accountant and business owner should have. Simply knowing how to reconcile an account correctly can be crucial to your financial health as it ensures that your financial records are always accurate. Regular reconciliation of reports allows you to control the most liquid asset – money better. The proper process will avoid abuse and fraud – separate those who issue invoices, conduct bank statements, and reconcile accounts – when they are different people, everything will be under control without your direct participation. Use an information system that allows for partial matching, keeps invoices partially paid, splits payments, adds required additional fields, and is easy to use.

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