Bank reconciliation is an important task for any accounts department. It compares your general ledger against your bank statement to check for any irregularities, such as overcharges, and provides helpful financial oversight from month to month.
Your bank reconciliation statement helps bring any missing money to the surface, so it is essential that payment issuance and reconciliation are separated. Bank reconciliation statements should be audited in-house at least once a month and at least once a year by an external auditor.
If you are looking to audit in-house, here is a simple 7-step guide to auditing your bank reconciliation statement:
- Gather your bank statement, general ledger and bank reconciliation documents for the month you wish to audit.
- Check the final figures on your reconciliation document against that account’s bank statement. The amounts should match.
- Check the final figures on your bank reconciliation document against your general ledger totals to ensure they both match.
- Pinpoint the difference between your bank statement ending balance and your general ledger total. Your bank statement should properly reflect the difference.
- Match transactions from your bank statement and general ledger account. Each transaction in one document should have a corresponding transaction in the other. To avoid confusion, mark these off as you go.
- Highlight any non-matching transactions between your general ledger and bank statement. These items are ‘reconciling’ items and should be accounted for in your bank reconciliation document with a full explanation for the discrepancy. These items are usually the result of funds that have not yet cleared or checks that are waiting to be cleared.
- Double-check that the difference between your bank statement and general ledger is properly accounted for in your bank reconciliation document.
For A Simpler In-House Audit…
Bank reconciliation is essential to keep up with your accounts, but a laborious and tedious task, even for a small business. As your business grows, the volume of transactions will increase dramatically. What may only take an hour to start could end up taking a few days and is liable to be riddled with errors.
The alternative to this lengthy 7-step process is to automate the reconciliation process with specialized software and transform a task that typically would take you days to complete into one that would only take a few hours.
Adra Accounts provides automatic account reconciliation software to small and medium-sized enterprises. The software’s advanced robotics can complete most of the work for you and provides an overview through detailed reports. Discover more benefits of automatic account reconciliation here.
Written by: Ashton Mathai