Proper reconciliation of bank statements is vital for any business. Almost all of your business transactions go through your bank account; every bill you pay, every bit of revenue you receive.
The reasons for completing this very important step are:
- Identify errors – the potential exists for human error. If companies fail to reconcile their bank statements every month, these errors may go undetected and they could be costly.
- Identify fraud – the potential for undetected loss is high. Not all employees are honest, and you may not miss money that has been taken for some time. This is how some employees are able to embezzle thousands if not millions of dollars over time
- Maintain accurate records – It’s easy to forget to enter an expense or a payment when you’re in a rush or if you’ve misplaced a receipt, so cross-checking against the account statement can be a good safety net.
Not only should you reconcile your bank accounts each month, you should also reconcile your credit cards, loans, lines of credit, etc.