The first thing I ask potential clients in our interview is…”Are you reconciling your bank account every month?” The answer to this one question usually lets me know how much work is going to be involved and how difficult it’s going to be. If cash is not being reconciled, then it’s a pretty good bet that the rest of the bookkeeping is in bad shape. Cash is king and it should be treated and managed as such.
Bank reconciliations should be done every month and reviewed by someone who didn’t prepare them – usually the owner or a responsible manager. Just by reviewing the monthly bank statements, I can learn a lot about the workings of your business because the majority of your transactions flow through your bank account. The function of the bank reconciliation is to cross check or reconcile the bank statement balance with the “Cash in Bank” balance in your general ledger. The two balances rarely ever match because of the delay in checks and deposits clearing the bank, automatic bank fees and bookkeeping errors. Errors are more likely to come from your side, but the bank is not mistake proof, so watch your statements closely.
One final comment……The last thing you want to believe is that one of your employees is stealing from you. One of the best methods for identifying theft and fraud is the monthly bank reconciliation. Make a point to open the bank statement every month and review the canceled checks for any irregularities. Look for unidentified or unauthorized cash withdrawals or automatic deductions. Don’t be afraid to ask questions!
Bank reconciliations are the foundation of basic bookkeeping. If you’re not currently doing them on a monthly basis, please have your bookkeeper start immediately. If your employees need training, or you wish to outsource this critical function, please contact Steiner Business Solutions.
