Bank reconciliation and its relationship with the accounting management of a business
When we talk about bank reconciliation, we mainly talk about a Comparative financial control scenario in a venture. We understand that, in any company, having financial control over what comes in and what goes out is crucial. It is through the excellence of your What does accounting management become it is possible to extract a series of powerful information and data for the future.
Considering this level of relevance, understanding how bank reconciliation works in the era of digital accounting is a significant step in following market trends and thus keeping your company updated on environmental issues. Therefore, to help you, we have selected complete content on the topic so that we can understand, together, the correlation of these two business areas.
In this article, you will understand what bank reconciliation is, its importance and how it works in practice. In addition, we will discuss the properties that bank reconciliation must carry out and, more than that, how it is significant and must be carried out within companies.
Be sure to also check out our publication on the”Accounting in the digital age: how does it work in practice?”
What is bank reconciliation and what is its importance in accounting management?
Bank reconciliation is nothing more than part of a company's financial control process. In this process, a comparison is made between input values (what is earned) and output values (what is spent). In practice, bank statements are analyzed for accurate information, and this is precisely where the list of the nomenclature of the term can be found.
Still with regard to terminology, the fact of reconciling is, precisely, an attempt to understand the association between profits and losses of a company. When we talk about “losses” and “exits”, we are not dealing literally with losses, but also with investments, such a common - and important - aspect for any business.
This is an extremely important step for internal control over financial matters and can be carried out using various software on the market or even through Excel spreadsheets. Regardless of how it is prepared, bank reconciliation is important for:
- notice fraud earlier;
- be accurate about short- and long-term entries and exits;
- control total rates and interest;
- detect general errors;
- provide financial health for your business;
- have faithful information on accounting matters.
It is also important to mention that this process is part of the accounting sector of a company, more precisely on the issues digital accountants. Digital accounting refers to the new automation processes that companies have undergone in recent years.
We talk more about it in our post about Digital Transformation and Document Management: understand the relationship!
How is bank reconciliation performed?
Erroneously, bank reconciliation is considered to be slow and a bit complex. The truth is that, even if an enterprise does not have sufficient support, it is important to be prepared to receive such a management process. To clarify, we selected a practical example of a simple type of bank reconciliation.
Imagine the following scenario: you own a supermarket that, in one week, received payments of R$ 1,000 in credit and, in another, R$ 2,000. At the end of the weeks, you must write down all the amounts received in credit in a minimum spreadsheet control and then check if these amounts were received in your account.
This minimal process is known as bank reconciliation. At more complex levels, these steps must be carried out with greater control and organization of information and values. On the other hand, it is important to mention that this management does not have to be difficult, on the contrary. Excel spreadsheets, for example, adequately resolve reconciliation issues.
By whom and when should bank reconciliation be carried out?
Bank reconciliation must be done by any company with cash flow — in other words, almost every venture. The ideal frequency is every 15 days, different from the cash flow processes that must be done every day. Some companies choose to carry out their bank reconciliation monthly and even annually, depending on the needs of each business.
To determine the ideal frequency for your venture, it is important to know how to diagnose how your company's accounting sector is functioning. Basically, if there are no problems found when you carry out the bank reconciliation, it means that your company does not need the reconciliation to be carried out so frequently.
An interesting tip is to start biweekly until your business has enough support to increase the period between conciliations.
How should bank reconciliation be carried out in companies?
Once the main aspects of bank reconciliation have been understood, it is time to understand how this process should be carried out in practice. The first aspect to be mentioned is to plan and develop spreadsheets to fill in the fields according to your company's needs.
In this spreadsheet, you must have pre-defined analysis periods and include the company's bank accounts. Then, you will need to enter the data obtained so far for the analysis to begin. You can easily find ready-made spreadsheets, but it is interesting to change them according to the particularities of your company.
So far, the process can be carried out by any employee present in the financial sector of a company, on the other hand, the Analysis should be limited to the accountant. An option widely used by companies is to hire an outsourced service, making this financial control system even easier.
The automation of bank reconciliation is also a reality for the financial sector, which favors the simplification of processes by 100%. More than facilitating, any and all automation also helps to ensure that there is effectivity and efficiency. Want to learn more about business automation? We talk more about it in this post:”Understand what automation is and how it can revolutionize your company”.
On the Clicksign blog you have access to more articles about accounting management and everything that involves process automation. Be sure to check it out! And finally, if you want to digitize your processes, as the main companies in the market do, in an applicable and legally valid way, don't waste time and discover our Plans and Pricing.
