When you reconcile your bank statements, you preferably verify that your business transactions are correctly recorded. So, you can compare your record and your bank’s record to find out if there are any inconsistencies. This will help you ensure that no money goes missing from your bank account. And it will also tell where your business is exactly. It will also help you track the bank charges or taxes you may not know.
Table of Contents
So, Why is it Important to Reconcile Your Bank Statements?
Identity Verification for Banks:
The Identity verification of Banks is a critical procedure to ensure that the individual who is opening the (bank account) or applying for the loans is the person they are entitled to be. However, identity verification is essential in opening banking, anti-money laundering (AML), and know-your-customer (KYC) processing. Subsequently, banks that could fulfill such confirmation services must connect to the database. It allows different applications to communicate, allowing banks instant access to customers’ financial data and avoiding time-consuming ID verification.
Tracking the Cash Flow:
When you run any business, tracking your cash flow should be at the top of your priority list. With the help of bank reconciliation, you record your business’s financial status, where the money goes, and help you plan your payments effectively.
Taxes Reporting:
Do you worry about whether the tax return is precise or not and also about the bank balance and bank statement balance? This is where reconciling the bank statements will help you track your taxes correctly. Some banks also provide easy and quick tax calculations, leading to more accurate reporting.
Financial Status of Your Business:
As we have seen earlier, reconciling your bank statement will show where your business is exactly. Suppose the Business accounting record doesn’t match your bank statement balance. Then, you may end up with more money than what you have. So when you reconcile the bank statement, you will know all the interest and other bank service fees. Also, you will have accurate data about your company’s bank balance.
Fraud recognitions:
When you reconcile your bank statements, it will tell you any fraud that will happen in your bank account. It doesn’t stop the scam, but it will at least let you know. For example, if there are unauthorized withdrawals from your account or, according to your company record, your account should have 1,00,000, but the bank statement shows a balance of only 85,000.
Deduction of bank errors:
It does not happen daily, but sometimes banks can make mistakes, too. If you have seen any difference in the company’s and bank records, reconciling your bank account can be beneficial. And if there is no proper explanation, you need to talk to someone from the bank.
Ensuring that you Receive all the Payments that are Due
We all know that nowadays we get all the bill details online, but sometimes, due to a problem with the server, you won’t receive the information, and your record can go wrong. So when you recognize and include all the recent bill payments, You can find out the error that happened. This will help you record all the bill payments and save money.
Conclusion
When you run a business, reconciling bank statements would be an excellent idea to compare your business financial records with the bank records and ensure that these two records always match. This process will help you find discrepancies or fraud in your bank account.
