The Bank Reconciliation is a process that compares the bank statements with the internal accounting . This internal control procedure must be carried out periodically, as it allows the detection of possible cash flow errors.
Every day, companies carry out various financial transactions (payments, transfers, receipts, investments, etc.). To ensure that these same transactions are properly registered, it is necessary to reconcile accounts: comparing the inflows and outflows and the transactions carried out by the company. The result of bank reconciliation should be a clear and objective report, in which it is possible to identify the differences found between bank statements and the company’s internal balance.
ONLINE BILLING SOFTWARE
Invoice in your office, restaurant or store for 4 € / month?
Try 30 days free!
NO CONTRACTS OR LOYALTY.
Bank Reconciliation Step by Step
- Identification of bank accounts : companies may have several, for different purposes, but all must be reconciled;
- Daily entry of all financial movements carried out : inflows and outflows must be carefully recorded (payments to suppliers, payments for bank loans, payments of salaries, taxes, receipts from customers, etc.). A spreadsheet or certified software can be used to register;
- Bank balance confirmation : with all transactions duly posted, it is possible to check the bank and financial balance. All the values and dates of the movements must be compared and confirmed and the correct ones should be marked;
- Treatment and correction of divergences : irregular financial movements (bank statements and records that do not match) must be analyzed. Researching the source and reason for the irregularity is important to make the correction;
- Bank reconciliation : the objective is to obtain the accounting balance from the bank balance, justifying the possible difference (for example, checks issued, but not yet cashed at the bank).