What is bank reconciliation?

Bank reconciliation is the act of comparing the movements of the company's bank accounts with the internal financial control of the business.

In practice, the person responsible for this activity will check whether these records are identical or whether there is a difference between the two. In the latter case, it is necessary to take the necessary steps to understand where the error is and fix it before it harms the finances or even other sectors of the company.

The importance of bank reconciliation in your company's accounting

Anyone who has a business knows how important financial control is. It is he who guarantees the financial health of the company, prevents fraud and even facilitates the accounting work – and all of this is essential for the maintenance of the company and its operation within the law.

One of the main functions of bank reconciliation is to control the revenues that arrive through card sales and payment slips. But it also helps prevent fraud within the company – if an employee changes internal records, this will be pointed out by the bank reconciliation, as it is not possible to change bank records.

In addition to fraud, bank reconciliation also helps to identify small errors made by internal control, but which can make a big difference in the long term and significantly harm the company's accounts.

These small errors can also impact the veracity of tax and accounting statements issued by the company. And you know that errors in this type of statement can cause big problems, right? In addition to paying fines, the company can even be accused of committing tax crimes.

Therefore, even though it is a simple activity, bank reconciliation is of great importance in the company's routine and should not be left aside.

Learn how to do bank reconciliation

Now that you know what bank reconciliation is and how important it is for the company's financial health, check out the step-by-step guide we've prepared to help you insert this task into your company's routine!

Log all entries and exits

The record of inflows and outflows of company cash resources is called cash flow. . This control is essential for bank reconciliation, in addition to helping the management team with other administrative routines.

All transactions must be registered, no matter how small the transaction value.

check the balances

Before going into the more detailed analysis, check the account balances at the end of the period. Does it correspond to expectations, according to the cash flow control? If the values ​​are different, this is a warning sign. you will certainly find inconsistencies in the comparison, so you should be extra careful when checking.

review the details

When it comes to analyzing the details, you really should pay attention to them. Some people tend to only check transaction amounts, but it's important that you also make sure the dates and times are correct.

correct the discrepancies

Whenever you find an error in the records, you need to fix it. If the error is in the internal control, the task is easier. Just call the responsible person and ask them to make the adjustment.

If the error is on the statement, you will need to contact the bank.

Store data and documents

Be sure to store all documents that prove these financial transactions, such as invoices , receipts and proof of payment. It is also very important that you store the statements, as banks do not always make older statements available.

You can print them or save the files in the cloud, so they are stored more securely.

Ideally, you should do bank reconciliation on a daily basis. That way, you guarantee that you will identify errors as soon as they are made, while there is still time to correct them. 

However, depending on the number of transactions carried out by the company, reconciliation can be done weekly or even monthly.