10 Apr A simple guide to account reconciliation in business
Most businesses rely on financial statements to understand the financial health of their outfit.
It’s using statements that businesses gain indications of profitability, liquidity, and solvency of the enterprise. However, the statements are only as good as can be verified from reconciliation.
Reconciliation is all about connecting accounting with the bank statements and records of cash to avoid any discrepancies. While the process helps protect the business, most do not undertake it often. They find comparing the multiple daily transaction data tiring.
Here’s why reconciliation remains crucial for your business and how to do it effectively:
Why does your business need a reconciliation?
Account reconciliation is one of the best ways to ensure proper money financial management and regulatory compliance. It helps you understand the business’s money and how it is spent. You can also keep track of what’s left and plan how best to use it.
Reconciliation helps you to confirm the accuracy of your financial records. In case of any discrepancies, you can always sort it out early enough before it risks the business. It also keeps the business safe from any regulatory fines and penalties.
What causes differences in the account reconciliation process?
Some of the common causes of account discrepancies include:
There are cases when transactions are captured on the general ledger as complete when the payments are yet to be cleared or received.
Errors are always possible during the entries, which will mean wrong account records.
There are times when payments are already received, but the transactions are not included in the data.
How to do reconciliation
While you can choose to do reconciliation manually, it takes a lot of time and requires specialised labour. You are better off making the process as seamless as possible to save on time and costs.
To make the process easier, you need to connect your bank accounts using accounting software. You should also connect your sales channel and payment gateway for easier report tallying.
Still, the only sure way to have accurate reconciled financial data is by working with professionals. Our Manchester based team of experts uses top accounting software to ensure accurate reconciliation. Contact us today for your business financial health and small business start up support.