The Importance of Account Reconciliation

As a small business owner you have to wear many hats and have varying responsibilities. Their are so many important things that need to be done and in the midst of fighting all of the fires that happen on a daily basis some things have to slip through the cracks. Many times the business owner has to focus on the front line activities, sales, customer service, and resolving issues that the back end of the business is unintentionally neglected. One of the important back end tasks is account reconciliation. Most businesses have multiple bank accounts, credit card accounts, loans, etc and the number of transactions on each of these are significant. 

Account reconciliation is the process of validating the companies records against the bank or institution's transaction list to ensure that nothing was missed on either side, and that only authorized transactions were made. This can be a very tedious, but important process as it can have direct financial implications on the companies bottom line. I've known some business owners who don't reconcile and just go by whatever the bank says on the register, but this can be a huge mistake. First of all, not all checks that were written in the current month will clear the bank in that month. If this isn't taken into account on the registers it can skew the financial statements for that period, and if the owner is just looking at the register will think that he has more money in the bank than he actually has which can cause cash flow issues.

Banks make mistakes too, they have millions of transactions that go through sometimes daily and they may make a mistake in crediting or debiting your account. Regular transactions sometimes post twice, or do not post at all, sometimes refunds aren't credited back correctly causing the balance to be off. These mistakes sometimes take months to discover and correct and these mistakes can skew financial statements for the company making it difficult to understand where the company currently stands financially. It is important that the owner have a clear understanding of the companies overall financial picture as this helps him or her to make the right business decisions at the right time directly affecting the companies bottom line. 

Cyber crime and identity theft are also a very valid reason for you to be diligent in ensuring that all of your accounts are reconciled on a regular basis. Going through the account transactions line by line is a quick way to identify fraudulent charges. Many times criminals will make small purchases to make sure that the account number is correct before making much larger purchases. If these are found quickly through the reconciliation process it can save the company much money and headaches. 

At Servant Bookkeeping Solutions we can take this burden on your shoulders so you can rest easy that all of your accounts are reconciled on a regular basis. This service alone could save you more money than the cost of our standard fees and help you have the piece of mind that your accounts are protected, and accurate which rolls directly into the accuracy of your financial statements. When you have accurate financial statements you are able to make better business decisions directly affecting the profitability of your company.

Be sure and check out our website at http://www.servantbookkeeping.com/