Electronic banking is a necessary mode of payment in this modern times. There is a misconception that bank reconciliation is not required. Bank reconciliation helps to match bank statements with expenses in your accounting records. Most of the accounting software applications that provide bank connectivity accelerates the reconciliation process. If you get the banking reconciliation process in place, it keeps your finances correct, and if it is wrong, then finances topple to the bottom.
Small business owners should focus on periodic bank reconciliation to keep their finances accurately and in place.
Bank reconciliation is the process of confirming that accounts statements match expense records according to the bank statement. e.g., the opening balance, the closing balance, and each bank transaction.
When you buy a flight ticket on the company’s credit card, this record must update the bank statement. If you do not update this on the bank, there will be a mismatch of expenses. This method of record entry and matching with bank statements is bank reconciliation.
Banking reconciliation helps you keep the company’s finance in the right place and track all expense records to identify errors and suspicious transactions.
Incorrect bank reconciliation records will project the wrong financial statement, leading to harsh consequences for small businesses. One of the common mistakes is not considering opening balance into account while recording the company’s bank statement.
Manual entry of transactions on a spreadsheet or paper ledger can leave with errors or miss a few accounts transactions. If any transaction misses during entry, then the sales figures are not accurate. Tax officials may use this opportunity for inspection for evading taxes. And if you enter extra expenses or double entry the duplicate transactions, you may pay more tax to the tax department. Automated invoicing and accounting solution helps to record error-free data to maintain bank statement.
Accounting software and invoice management tools help retrieve data from bank statements uploaded as CSV files or data from bank feeder providers.
It is simple and easy to reconcile your bank accounts when cloud accounting software utilizes—different accounting software aids to organize the transaction appropriately in various sections of the account report. E.g., for a train ticket purchase, the entry should be made to the correct areas of accounts. So, categorizing the expense according to various sections is necessary.
Digital invoicing tools like GetMyInvoices help in importing invoices from multiple sources automatically and links your invoices with the account transactions with the banking module. Sign up for a Free Trial.
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