Monthly Reconciliation: Why Is it Important?

Monthly reconciliation of your bank statement is a vital activity for any small to medium-sized business. Cash is the most vulnerable asset you have, and bank reconciliation is the mechanism that protects this resource from errors and unauthorized transactions. Simply put, the bank reconciliation document compares the business’ transaction records to those of the bank with the goal of matching the data 100%.

Catch Errors
Regular bank reconciliation is the only way to catch errors made at the bank. Tellers may mistakenly enter a deposit, potentially causing a ripple effect of account funds that are insufficient to cover debts. If you wait several months to reconcile, errors will be harder to track down and more difficult to get the bank to rectify.

Follow up on Transactions
If you’re mailing checks to vendors, it really is possible for the check to be “lost” in the mail. Reconciling helps you find checks that you expected to clear that haven’t yet, and allows you to investigate why that may be the case.

Keep an Eye on Company Performance
Reviewing bank reconciliations each month will help you keep a finger on the pulse of your business. When you’ve already established a clearly defined budget (Which you should!), regular reconciliations will help you determine if you’re on track, exceeding, or falling short compared to what you’ve budgeted.

Prevent Losses
If you don’t reconcile regularly, the potential for undetected loss is high! We want to believe all of our employees are honest and thorough, but mistakes also happen. The fact is, you must inspect to get what you expect. Not following up on bank reconciliations regularly has made it possible for some less-than-trustworthy employees to embezzle millions of dollars from their companies.

Our team of Chief Financial Officers and Staff are well-trained in bank reconciliation and completely transparent with business owners like you, so you can expect to completely understand the state of your business month-by-month. Call us today to get started.