Reconciling your bank accounts may not seem exciting, but it's one of the most effective ways to protect your business from embezzlement and errors in financial reporting. For this reason, knowing how to reconcile your bank accounts the right way is critical for your business. Below are three tips for completing the process as accurately as possible.
Lock the Ledger First
It's important to lock the accounting period in your general ledger system before you attempt a reconciliation because the general ledger cash balance is one of the figures you use to reconcile your bank statement. If the ledger isn't locked, and the general ledger balance changes after you start your reconciliation, you cannot reconcile your bank account accurately. While some bookkeepers complete preliminary reconciliations before the ledger locks, they wait to sign-off on the reconciliation until after the accounting period closes.
Review & Approve Reconciliations
Having a review and approval process for reconciliations is essential for effective internal control. Otherwise, one of your staff members can "force balance" a reconciliation and never actually catch mistakes. Also, it doesn't hurt to have a second set of eyes review a complex reconciliation because errors in the reconciliation process will be easier to see.
Create a Legend
If you're preparing a bank reconciliation in Excel, you need to create a legend to classify all of the different reconciling and timing items that you have. Otherwise, it will be hard to keep track of and deal with items that need adjustment in your general ledger, or cash deposits and withdrawals that need adjustment in the bank. The more organization on your reconciliation, the better for everyone in your company.
For additional bookkeeping tips and help with bank reconciliations, please contact us today. We are here to answer your questions and enhance the efficiency and effectiveness of your bookkeeping process.