Reconciling your accounts may seem like an arduous, or even unnecessary process, but alas, it is one that must be done. Do you ever sit back and wonder why, though? You’re not alone. Many don’t understand why they constantly reconcile their accounts, but after you go through these next few pointers, hopefully you’ll see why it is important and one you should make sure you do on a regular basis.
Prevention of Fraud
- By reconciling your accounts on a regular basis, you will be able to inspect any fraudulent activity that has happened. This is also true on a personal level, especially in today’s climate of identify theft. Wouldn’t you rather see if there is any fraud happening sooner rather than later while the losses are still small and manageable?
- You may see checks that are leaving the account that have been duplicated or changed, which means more money is leaving than you expected. Or checks may have been issued without your authorization. Are there missing deposits?
- Catch fraud before it’s too late, especially since you don’t receive protection for business bank accounts like you do for consumer accounts under federal law.
Quickly Catch Financial Input Errors
- Even under the best of circumstances, there can be times when the money that is being spent doesn’t quite match the money leaving the account. It could just be a simple human error, like transposing numbers, entering a decimal in the wrong place, or other innocent mistakes that can cause financial errors. Ultimately, this could impact the bottom line. Especially if specific transactions aren’t even getting entered into your system!
- It may help to identify continuing mistakes, which may lead to a change in responsibilities for who is handling the reconciliations, as well. Or, it may be time to put a more sophisticated record keeping system in place. Make sure the accounting processes you have in place actually work!
Possible Bank Errors
- Administrative mistakes on your side aren’t the only things you want to look for when you are reconciling accounts. You will want to make sure that the things you purchased were charged correctly.
- Imagine making a large purchase for your business, or a business expense that was made, and it somehow got charged twice on a credit card bill or bank account. You may be in danger of being overdrawn. Reviewing your accounts will prevent this from happening!
Control Spending
- As a business owner, it’s important to know how much cash you readily have available in your accounts on a regular basis. You will also want to make sure you aren’t wasting money on fees a result of bounced checks or insufficient funds in your account.
- In addition, you want to make sure you keep track of customer payments and ensure they haven’t bounced or failed to clear, as well. It requires action on your part to collect what you already assumed was in your account!
- You will want to reconcile items monthly, which will help identify any problems before they become too large to easily handle.
You got this!