It is a faff, time-consuming and more than a bit dull. In fact it is one of my least favourite jobs in running a business - so why do it at all?
Well once it is done it gives you some of the most important information that you can have in the running of your business.
Accuracy: Reconciling helps ensure that your financial records accurately reflect your bank account balance. By reconciling your records with your bank statements, you can identify and correct any errors or discrepancies.
Fraud detection: By regularly reconciling your accounts, you can detect and prevent fraudulent activity, such as unauthorized transactions or misappropriated funds. Fast action will nip this in the bud.
Financial planning: Bank reconciliations can help you track your spending and cash flow, which is essential for effective financial planning. By having accurate and up-to-date records, you can make informed decisions about your budget, investments, and other financial commitments. In fact it is the first step to producing a financial forecast document that I will link here.
Legal Compliance: Bank reconciliations are often a requirement of government agencies, check if this is a legal requirement with your own tax authorities. If so make it a routine you stick to and keep all your records to show it has been done.
Time is money: When you are starting out you really do not want to waste money. If you leave all your paperwork for the accountant to sort out you will be paying good money for someone else to do what is essentially a easy, slightly dull repetitive task. Do it yourself and have a finger on the financial pulse of the business. Save your money for something more valuable like renumeration advice and tax planning.
Why is doing a Bank reconciliation important?
It is a double check for your record keeping that protects you from fraud and gives you valuable information about the cashflow of your business to allow you to make financially smart decisions. Worth an hour of dull once a week isn't it
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