![]() ![]() ![]() For every activity, it’s best practice to define what will be recorded and the source documents that are needed to compare statements. Accuracy: Documenting accurate records of transactions requires a sound internal control system.Naturally, given the importance of financial reconciliation, there are established best practices that should be followed to get it right. To reconcile the bank statement to be correct, you must modify these errors by notifying the bank.īalance records: Once you’ve found discrepancies or resolved errors, ensure that the records are balanced and accurate.Īccount reconciliation software performs all these steps automatically by pulling data from every source of financial information, including bank statements, merchant services, credit card processors, and ERP systems. This could be in the form of duplicate records, incorrect records of transactions, commissions, etc. If you have receipts from the cash register that are not reflected in the bank statement, add them, and vice versa.įind errors: It’s unlikely, but possible, that the bank has made a mistake. As such, you want to be sure to identify these types of transactions because they could be cause for the discrepancy.Ĭonfirm: Once you’ve identified these types of transactions, they must be recorded. For checks deposited into the bank, there may be a delay for when they are reflected. These payments should be deducted from the bank statement because they are cash payments. Identify: Identify all payments that are recorded in the internal cash register, but are not reflected in the bank statement. Here’s how it works.Ĭompare: The process begins by comparing all transactions noted in your internal ledger against your bank statement. The account reconciliation process follows straightforward steps, whether or not it’s performed manually or automatically. So, to reduce compliance risk and protect your finances, account reconciliation is something that should be carefully managed and taken seriously.įinance Reconciliation Process: Step-by-Step If it’s inaccurate, you can face penalties when you get audited. If you run a public company, then account reconciliation is mandated. Finance reconciliation automation tools can run reports and compare transactions in the matters of minutes to point out anomalies in the transaction patterns. While some differences will naturally occur because of timing, finance reconciliation can highlight errors and spot overcharges promptly so you can take action to fix such charges. Balance sheets represent all the money you spend and all the assets you buy, so this is highly contingent on the accuracy of account reconciliation of accounts.įurthermore, account reconciliation can save your business money by potentially reducing overdraft fees and preventing improper spending. For starters, account reconciliation helps to make sure that your financial statements are correct. ![]()
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