The Hubbub with Bank Reconciliations

One of the most tedious, time consuming accounting tasks for small business owners is conducting bank reconciliations. As a result, they are often neglected and overlooked. However, this is not a healthy business move. Knowing exactly where your company stands financially every month empowers your business. Plus, banks are not infallible and are capable of making mistakes that cost your business money. While it usually requires a decent amount of time to reconcile your balance per bank with your balance per books, the result is an efficient and accurate understanding of your business’s financial status. In order to make this process as quick and accurate as possible, we have listed three tips to make bank reconciliations as headache-free as possible.

  1. Adjust the balance per bank. There are three main reasons why your bank statements may be incorrect: deposits in transit, outstanding checks and bank errors. If you made a deposit the night before your statement came out it is unlikely for it to be reflected on the statement. Checks that you have sent out but have not been cashed by the recipient will certainly not be reflected on your statement. Finally, check every deposit and withdrawal for accuracy. Clerks enter hundreds of numbers every day and are capable of making mistakes. Once all errors and discrepancies are identified, add or subtract them accordingly from the statement’s balance.
  2. Adjust the balance per books. This is virtually identical to the process used for adjusting the balance per bank. However, you are looking for some different discrepancies: bank charges, interest and once again errors. Banks have charges relating to everything from monthly fees to NSF fees. These will not be reflected on your books, nor will interest earned. After checking for errors, these all need to be added or subtracted from the book’s balance.
  3. Compare the adjusted balances. This is where you find out if your hard work has been fruitful. The adjusted balances should be exactly the same. If they are not, then you have likely missed something and need to comb through the process again.

Performing bank reconciliations can take practice to be able to complete in a reasonable amount of time, but the more you do it the better you will be at knocking it out quickly and accurately. As your business grows and time becomes scarce you might consider hiring VAST to perform all of your business’s accounting tasks. As one of the most professional and resourceful external accounting services in Reno and beyond, VAST gives you and your business endless accounting options.