Bank reconciliations are not the most exciting task to perform, but doing them correctly can help you save money and improve the accuracy of your financial statements. In particular, bank reconciliations can help you manage chargebacks, catch errant charges, and help you identify the misappropriation of cash, just to mention a few benefits. All of these positive results will save you money over the long run.
Chargebacks are a part of life when you sell goods or services to the public. In order to avoid losing chargeback disputes, you have to respond with your reasons for processing the charge and provide backup supporting your position. This process requires that you log into your merchant credit card accounts on a regular basis, checking for new chargebacks.
If you forget to do this or you don’t know that you’re supposed to, you can find chargebacks when you reconcile your bank accounts. In certain situations, you can still respond to the chargeback disputes and possibly save money. In the future, though, you will know to challenge chargebacks, because you caught them on your bank reconciliation.
Catching Errant Charges
Errant charges can show up on your bank statements when you least expect them to, especially if you have a large business with multiple bank accounts. For example, errant charges for meals and entertainment can suddenly end up on your bank statement, along with misstated bank service charges and inappropriate fees.
You can even have errant charges levied by government tax agencies for unpaid taxes if government agencies have the wrong tax ID on file. So, it’s important to reconcile your bank statements and catch these errors, so you can correct the charges and save cash.
Identifying Unauthorized Withdrawals
There are only certain individuals within your organization who should have the authority to withdraw funds from your bank accounts. Withdrawals are normally a formal process, unless you have a small family business or an organization where complete segregation of duties isn’t possible. If there are unauthorized withdrawals, you can normally catch them when you compare the general ledger cash account activity to the bank activity. When you catch unauthorized withdrawals, you can take action and potentially save money.
Catching Missing Deposits
If you have a process where employees prepare bank deposits then deliver them to the bank, or the deposits are picked up by a secure transport service, there is the potential for deposits to go missing. The reasons for missing deposits are diverse, but you can catch the problem by reconciling your bank accounts. If a deposit was recorded in your ledger but never hits the bank, you can contact the bank to determine if the bank didn’t deposit the funds correctly. You can also identify whether or not the deposit ever made it to the bank.
Correcting Misstated Ledger Accounts
Misstated financial statements can cause you and your organization a myriad of problems ranging from dissatisfied investors to money spent on auditing efforts. Bank reconciliations can help you catch problems in your general ledger cash accounts before you publish your financials. In turn, this can save you time and money performing rework further along in your accounting cycle.
Cash and cash equivalents is one of the most important line items on your financials. Bank reconciliations can help you keep that line accurate, saving you money in the process.
Bank reconciliations can be tedious, but they are a fundamental bookkeeping task that can protect your assets and help you save money. Managing chargebacks, catching errant charges, and identifying the misappropriation of assets are only a few of the benefits of completing bank reconciliations.