The process of comparing your balance (known as the book balance) to the bank’s records (bank balance) is important for the following reasons:
Reconciling your bank statements monthly confirms that all transactions have been entered, are accurate, and the financial statements are a true reflection of how the business is doing.
Reconciling each month will:
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Fraud detection is a key reason for completing a bank reconciliation. You will be able to ascertain if any customer checks have bounced, or if any checks you issued were altered or even stolen and cashed without your knowledge. When there is an ongoing concern for fraudulent transactions, reconcile your bank account daily to detect quickly.
When it comes time for the annual audit, auditors will always examine the company's ending bank reconciliation as part of their testing procedures, so this is yet another reason to complete a reconciliation.
Bank reconciliations make you profitable! Don’t have the time? Outsourced bookkeeping could be the solution for you. Contact us today!