Common Mistakes in Dealing with your Bank Reconciliation

Some people believed that because it is not statutorily compulsory to present Bank Reconciliation Statements, therefore, its never that important in business. I’m often astonished to see many business consultants indicating as if less important. that It‘s not compulsory to prepare a Bank Reconciliation Statements and there’s no fixed date for preparing such statements.

Bank Reconciliation Statement is prepared on a periodical basis ( I strongly recommend monthly and I advised all my clients do monthly bank reconciliation), to ensure or checking that bank related transactions are recorded properly in cash book’s bank which you maintain in-house and also by the bank in their books.

By comparing opening and closing balances for both bank statement and Cash book with carefulness, you could identify discrepancies due to un-credited or un-presented cheques and other charges including unapproved withdrawals (if any) and unexpected deposits; from the previous period. helps to detect errors in recording transactions and determining the exact bank balance as on a specified date.

How to ensure efficient Bank reconciliation

Emphasizing more on the benefits, which includes;

  • Detecting or spotting Accounting errors: A bank reconciliation helps you in detecting or spotting accounting errors which are common to every business. These mistakes include errors such as addition and subtraction, missed payments and double payments.
  • Tracking Bank Interest and Fee or charges: Banks might add interest payments, fees or penalties on your account. Monthly bank reconciliation allows you to add or subtract such amounts in your books.
  • Detecting Fraud: You may not be able to prevent employees from stealing your money once, however, you could prevent it in future. Bank reconciliations statement helps you in detecting and spotting fraudulent transactions. It is advisable to employ an independent person to perform the reconciliations for preventing the accounting employee from falsifying your books and reconciliations.
  • Tracking Receivables: BRS allows you to confirm all your receipts, assisting you to avoid awkward situations and also identifying entries for receipts which you didn’t deposit.

However, a responsible business should ensure efficiency in reconciling all bank accounts. Firstly, you should understand perfectly well that banks can make mistakes too; –  It is possible that your bank might have committed a mistake. They might debit incorrect amounts from your account, or credit deposits which doesn’t belong to you. For this reason, in case you find errors for which you don’t find any explanations, or for which you’re in doubt, the best thing is to consult your bank.

Secondly, it’s essential to have all the required documentation and information in hand. That means, if all the required documentation and information are at your disposal you get a better view of things, to ensure efficient reconciliation exercise. This should be a consistent activities and it’s strongly recommended to be carried by an independent professional or outsourced firm.

Listing out differences with no action taken, your bank reconciliation would become meaningless, all recorded financial activities should reflect a true position of your business; which you can achieve through periodic reconciliation.

Thirdly, avoid common errors, such as: error relating to duplication of entries, not accounting for a transaction that would cause a difference equal to the missed amount, errors while entering commas and dots, which cause discrepancies of significant value, Transposition errors while entering figures in the books. For instance, instead of entering 221,200, entering 212,200.

Do You Need Accounting Help?

Bank Reconciliation exercise isn’t for everybody, it is for independent professionals because of certain complications that may occur along the line. It could also be daunting, time-consuming procedures. Not recording correctly and poor monitoring can cause complications and confusion.

Therefore, if you need some additional accounting help, If you want an easy program to keep your business records and recommendations on Bank Reconciliation Reports, we @Fritznoble assist our clients on the best available options that suit your business...

Reach Us or Outsource  With Us… If Accounting works are bothering you, then it’s time you outsourced your accounting and bookkeeping requirements to us. Hire us for all your needs and this will help you get more time to concentrate on other core activities of your business; with a team of professionals to help.Contact us  (+234) 0703- 001-2266 Or Email us on(guest posts welcome!): fritzandnoble@gmail.com.

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