Bank reconciliations are no one’s favorite chore but they are very necessary. Whether you have a staff accountant, use a computer program or keep your books by hand, reconciliations should be done promptly every single month to catch errors.
Even if you have strict controls in place, human errors can and often do occur. Some times these can be costly especially if a deposit is miscalculated or a check to be deposited gets separated in the bank’s processing unit. These types of errors can leave your business short of the necessary cash to operate and/or lead to bounced checks and low balance fees.
Tracking cleared checks on the monthly reconciliations will ensure that payments are being processed properly and outstanding checks can be followed up on as needed. Checks that have been deemed lost in the mail should have a stop payment issued by your bank on the chance that it eventually shows up.
You’ll also want to pay close attention to fees to ensure that the bank is not charging unexpected fees. Fee schedules can and do change so tracking them will be important to ensure that you’re not being overcharged. You’ll also want to anticipate the fees in your cash flow projections. If your business accepts or places wire transfers, be sure you know the fees involved.
Keeping a close eye on the monetary pulse of your business will keep things running smoothly. Also knowing the patterns of your business bank account will aid in loss prevention. Dishonest accounting firms and employees will be less likely to get away with skimming money when monthly reconciliations are tracking every penny.