One of the main objectives of accounting is to reflect the true and faithful image of a company. This maxim, which a priori seems easy to follow, is actually a challenge for modern organizations , due to the high volume of operations and information that they must manage in their daily activity.

Some processes help facilitate this. Among them, bank reconciliation stands out, an essential procedure to correctly reflect the company’s liquidity. In this article, we explain what it is, how to do it and how to automate it.

What is bank reconciliation?

Bank reconciliation is a process used by companies to compare and reconcile internal financial records, that is, their accounting, with bank account balances.

In essence, it involves checking and adjusting the differences between accounting balances and bank balances to make sure they match. If this is not the case, those responsible make sure to make the corresponding accounting adjustments to guarantee the consistency of the information.

Objectives of bank reconciliation

The objectives of bank reconciliation are the following:

  1. Ensure the accuracy and reliability of accounting records : Bank reconciliation allows a company’s internal financial records to be compared to official bank statements. Reconciling the two seeks to ensure that recorded balances and transactions are accurate and reliable.
  2. Identify and correct possible errors or discrepancies : During the reconciliation process, differences between accounting balances and bank balances can be identified. These discrepancies can be due to recording errors, such as duplicate or unrecorded transactions, and it is essential to correct them to ensure the accuracy of financial data.
  3. Detect possible fraud or fraudulent activities : Bank reconciliation allows you to compare internal records with bank account statements, making it easier to detect irregularities or fraudulent activities. By reconciling balances and transactions, unusual discrepancies can be identified that could be indicative of fraud.
  4. Ensure that the cash on hand matches the actual balance in the bank : Another main objective of bank reconciliation is to ensure that the cash balance recorded in the books of accounts is equal to the actual balance in the bank. This is essential to have an accurate picture of the financial resources available to the company.
  5. Provide accurate and up-to-date financial information – Bank reconciliation helps ensure that financial information used for business decision making is accurate and up-to-date. By reconciling internal records with bank statements, you obtain a clear and reliable view of the company’s financial situation.

Related Post