A bank reconciliation involves comparing your internal sales and expense records with the transactions recorded on your bank statement. It is a critical financial control used to identify and correct discrepancies, errors or omissions between your accounting records and the bank’s records.
Regular bank reconciliations help ensure your bookkeeping remains accurate and reliable. They can assist in reducing tax risks, identifying potential fraud, and improving visibility over business costs. Bank reconciliations are essential for several key reasons:
- They help detect errors and prevent fraudulent activity, such as unauthorised transactions, duplicated entries or incorrect bank charges
- They provide a clear and accurate view of your true cash position, supporting effective cash flow management and informed financial decision-making
- They identify outstanding deposits or payments that have not yet cleared, ensuring your financial records remain up to date
While manual bank reconciliations can be time-consuming, accounting software can significantly streamline the process. Reconciliations should be completed regularly to ensure transaction details remain fresh and errors are addressed promptly.
For further guidance on how to perform a bank reconciliation and why it is important, refer to this guide provided by Xero.
If you require assistance, please contact us. We can support you with setting up and maintaining regular bank reconciliations.
