Banks are one of the primary units of the accounting and financial activity of any business organization. In this advanced age of electronic banking, most of the business transactions payments involve online or traditional banking. Although banks are quite vigilant and careful in their processing, there is little room for error in every field of life.
What is Bank Reconciliation?
Business organizations cannot solely rely on the high performance of banks and need to reconcile their accounts regularly. Bank reconciliation means checking the company and bank accounts to identify the mistakes or ensure their alignment. Ignoring bank reconciliation can add loss to the company accounts, which small business organizations cannot afford in competitive markets like the United Arab Emirates.
Benefits of Bank Reconciliation
The bank reconciliation process offers a number of benefits to the small, medium, and large enterprises equally. Some of them are:
1. Detect missed payments
2. Identify calculation mistakes
3. Track bank fees and penalties
4. Identify financial theft
5. Uncover fraudulent transactions
6. Track payable and receivable accounts
Ensuring proper bank reconciliation is necessary to optimize your business accounts standard in Dubai. Explore this article in detail to learn how you can perform bank reconciliation.
Top 8 Steps of Bank Reconciliation Process
Reconciling all the business accounts is one of the most important duties of the accountants. Out of all the accounts, bank accounts are the ones that face the most negligence. The reason behind this is blind trust in the performance and functioning of the bank. However, this blind trust often stabs the companies in the back. So, do not commit the mistake of ignoring bank reconciliation and fulfill your duty.
Here are the top steps of the bank reconciliation process, which will help you eliminate the suspicions of mistake or fraud.
1. Collect Bank Records
The banks keep a record of all the transactions conducted by any individual or business organization. The first thing you need for bank reconciliation is the bank records. You can ask the bank authorities for the statement. Monthly or daily transactions of any business organization depend on the size of its operations. Large business organizations often need to perform bank reconciliation at the end of every day due to increased transactions.
2. Gather Business Records
The second most important thing that you need to perform bank reconciliation is the business records. The banks maintain the accounts on their end. The skilled accountants have the responsibility of maintaining the company records. Small business owners often try to accomplish all the tasks on their own but acquire the help of the best accounting firms in Dubai to manage and gather their business records and performs bank reconciliation.
3. Identify Starting Point
The next step in the process of bank reconciliation is identifying the starting point. You cannot just randomly start reconciling your bank and company records, as it will get you nowhere. In order to maintain the organization, you can start from the point where you stopped the last time.
4. Check Bank Deposits and Withdrawals
The next step in the process is checking the bank deposits and withdrawals. It means the amount you have added and withdrawn from your company account of the bank. The record of all the deposits and withdrawals should be maintained at the ends of the bank and company. If there is something missing in either, you can fix the mistake and inquire the bank about it too.
5. Review Income and Expenses
After checking deposits and withdrawals, you need to review the income and expenses in bank and company accounts. Sometimes, the business organizations make the payments in cash, which will not be in the bank statements. If you forgot to account for that expense, the reconciliation process will help you remember and record it to avoid future issues.
6. Align Bank Statements
Once you have accounted for all the expenses and incomes, the next step in the process of bank reconciliation is aligning the bank statements. There can be a few outstanding checks, deposits in transit, or record mistakes that can affect the bank statements and highlight the difference. Be sure to clear these issues to align the bank statements.
7. Adjust Cash Balance
Adjusting the cash balance of the company is equally important as aligning the bank statement. Take care of the fact that you have cleared all the bills and payments, and there is nothing left to clear. In addition to it, pay attention to account receivables too to adjust your cash balance.
8. Compare Final Balance
The last step of the bank reconciliation process is comparing the final balance. It should be the same in the bank records and your company records. Poor account management can bring a huge gap in the balance, so do not rely on the amateurs. You can hire the service of the best accounting firms in Dubai and let the certified professionals properly manage your bank reconciliation and other accounting matters.
Pay attention to your accounts reconciliation to minimize loss!
Without reconciling your bank or other business accounts, you are bound to suffer loss. So, do not add loss to your accounts with your own hands. If you are not skilled in handling accounts, there is nothing to worry about, as you can always consult the experts and enjoy the profit from their skilled management. Make the best decision according to your needs and enjoy profits in your business accounts.
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