Bank reconciliation: what is it and how to put it into practice?

Obviously, these words are common within companies. However, many of them are not in the habit of carrying out these operations. Which can generate major headaches in the long term. So that this is not a problem in your business. We have brought essential information about bank reconciliation.

Enjoy reading and check it out!

What is bank reconciliation?

The act of reconciling banking operations is nothing more than confronting these movements with cash flow forecasts and, consequently, with the balances recorded in accounting.

In theory, everything that went through the bank would be registered in the company’s system, wouldn’t it? The answer is, not always. It is common for urgent requests to occur that often need to be carried out without prior notice, that is, they are not foreseen in your cash flow control .

In situations like this, the lack of a bank reconciliation can cause a real financial mess in your company’s accounts payable, causing delays in accounting. As this sector is responsible for registering and controlling all equity movements, based on the double-entry method, every debit requires a credit. When one of the launches is not properly carried out, it is necessary to analyze the operations.

In short, with bank reconciliation, these situations are resolved within the financial sector. Delivering a verified service to colleagues in the accounting team, which allows them to be responsible for checking these balances against the values ​​presented in the accounting accounts.

Conceptually, bank reconciliation is the act of aligning and checking every payment or entry made and evidenced in the bank statements with the company’s internal records, either with cash movement or due accounts receivable.

To make it easier to understand, let’s take a practical example: suppose that company X pays bank slips in the amount of R$100,000. Bank reconciliation will be the action of verifying whether the write-offs made in the system match the withdrawals from the bank and, obviously. The amount entered in the cash flow.

This procedure helps the company to locate possible duplicate payments and even reduce the risk with cases of fraud.

How to do a bank reconciliation?

Concepts and definitions understood, the time has come to analyze the practical part of bank reconciliation activities. For this to be done accurately, it is important to follow some steps that are described below.

Register daily releases

In order to have a correct bank reconciliation, it is important that all transactions are recorded. This step is essential to ensure that all inputs and outputs have been entered.

To hold more information about the data, it is important to include historical data such as the name of suppliers or customers, in addition to sticking to dates and values. These references, in addition to being used during the process we are studying, are of paramount importance for the management of the project. As they guarantee a broad view of all the movements that have occurred and who are involved in them.

Use a management system

It is evident that spreadsheets were once very useful for bank reconciliation. However, today,  technology  has modernized this process and with a management system it is possible to integrate all financial information.

The computerization of processes made it possible to import bank statements and their balances in an instant, the verification of everything that is registered with the entries of the statements is carried out with a reduced time, in addition. This new form of importation guaranteed greater security of information.

But at this point, it is essential to understand that technology facilitates the financial and management process. While it is crucial to have a specialized company to analyze data and extract accurate information for management reports that contribute to better business administration.

Talk to your accountant

It is not new that we know the importance of the  accountant  for any type of company. He is an expert in analyzing financial transactions and will be responsible for assisting in the decision-making process.

The accounting professional will bring tips on how to control and update the company’s cash flow, thereby eliminating some problems that could harm bank reconciliation and working capital .

Therefore, if you have doubts about management practices, both regarding daily operations and analyzes for the decision-making process. This professional will be the one who will bring the solutions to your company.

Make the adjustments

Many banking operations are not part of the projections of financial controls, this occurs mainly in cases of loans, financing, insurance and bank fees.

Therefore, for the accounting reconciliation to be correct. It is necessary to make the accounting adjustments, that is, to enter these transactions so that the balances shown in the bank reports are the same as those in the accounting.

How important is it to carry out bank reconciliation?

A company’s financial demands are normally voluminous, after all, several operations are carried out. Which can lead to errors and misunderstandings – both for numbers above the real ones and in negative differences. These failures, in the long term, can compromise the solvency of the business, generating risks that can result in bankruptcy.

However, if you have the possibility to correct these occurrences before presenting the data to members, it is better to do so. Bank reconciliation also serves this purpose, checking inconsistencies in the financial sector.

With its realization, it is possible to monitor the entries via credit card and the write-off of invoices. As well as the payments of slips with the released invoices. This operation helps verify the reliability of the projections made by the company. In view of this, it can verify whether the reports used are sufficient for the daily demands of the enterprise.

There is no rule for when bank reconciliation should be carried out. However, it is suggested that it be carried out daily, in order to locate possible inaccuracies as soon as possible.

Leaving aside some activities that may not seem so important at first can open bottlenecks in business management. In addition to possibly raising erroneous information about the   company’s profitability .

Therefore, rethink your priorities and always count on the help of the accountant. Making this activity a rule in your company prevents the occurrence of errors and monitors the financial control of the enterprise