Most business accountants are frustrated to know that at any given time, a company’s banking and financial accounts will show a different balance than the ones that are on record. Accounting reconciliation is a way to keep the balances in sync.
Accounting reconciliation is the process of comparing monthly transactions of your company’s financial accounts with monthly statements from the banks or financial institutions that serve you to keep everything in check. And it can benefit you company in five important ways.
5 Ways Accounting Reconciliation Benefit Your Business’ Bottom Line
Eliminates accounting errors. Accounting reconciliation on a monthly basis is a great way to keep your bookkeeping identical to what is recorded at your bank or financial institution. It can help catch errors, which can easily happen on either side. And ultimately it will help eliminate those errors and keep them from happening again.
Keeps surprises from hitting your account. Suppose you pay a check to a vendor and that vendor delays cashing it for months and months. Would you even remember that it was going to be deducted from your business account? If you reconcile your account each month, you can keep track of all transactions. Even ones that might be delayed.
Keeps your business deposits correct. Human error can lead to deposit errors at your bank, which could have dire effects on your business and reputation. Imagine being short of cash in an important account that pays a portion of your expenses? Monthly accounting reconciliation can keep it from happening. Which leads to our next benefit regarding your bills.
Keeps your bills paid. If you have bills and expenses that are automatically deducted from any of your accounts, then keeping track of all transactions and reconciling balances each month can keep you from having an overdraft or missing a payment.
Finally, it saves you money. Reconciling your accounts is great for your business and profitability because it can help you identify bank fees and other hidden expenses you might not know you are paying. Many of these fees can be removed by simply talking to your bank or financial institution, if you know that they even exist.
These are just a few benefits of how monthly account reconciliation can benefit you—and your bottom line.
Can you think of other benefits? We'd love to hear your thoughts on accounting reconciliation and ways it can help you and your business.