In accounting, bank reconciliation is a process that explains the difference between the balance shown in a business’ bank statement, as provided by the bank, and the corresponding figure shown in the business’ own accounting records, on a specific date. The process involves looking into the difference by taking into consideration factors such as cheques issued but not yet presented, and cheques deposited but not yet cleared or credited.
Bank reconciliation is an essential process for your small business. Get it right, and you’re well on your way to being on top of your finances. Get it wrong, and you could end up paying more tax than you should.
Getting bank reconciliation wrong can leave you with an inaccurate view of how much money you have in the bank, which could have painful consequences for your small business. One common mistake is not setting the opening balance of your business accounts to that of your bank account before you start recording transactions in your accounting records.
If you manually retype transactions between your bank statement and a spreadsheet or paper ledger, you may miss transactions. If you fail to log a transaction, you may look like you’re under-reporting your sales. HMRC might see this as a sign that you’re trying to pay less tax than you should, which could trigger an inspection from the taxman.
If you add extra transactions or accidentally double-count transactions like sales, you’ll be liable to pay more tax than you should. It can be costly and time-consuming to rectify these types of mistakes.
A bank reconciliation helps you spot accounting errors common to any business. These mistakes can include addition and subtraction errors, double payments, lost checks and missed payments. You might have recorded an invoice as paid in your general ledger, but a bank reconciliation might reveal you forgot to write the check. At times, your bank might make an error in your favor. You will be liable for returning that money, even if you’ve already spent it.
Benefits of our Bank Reconciliation Services
Fee & Interest Tracking
Transaction Status Updates
Puts Accounts In Good Standing
Achieves Accurate Balance
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