Managing a small business is not a piece of cake, as many people think it is. The business dealings, production, sale, and management all are on a small scale, but they require more expertise and skill, as one of the biggest goals is to scale up the business. Even if it is not the ultimate goal, ensuring smooth and successful progression is necessary.
The smooth management of the small business is impossible without bank reconciliation. It is an important part of business operation which is meant to ensure maintenance of account records. Bank reconciliation is actually the process of double-checking the business bookkeeping by reconciling the business accounts with bank accounts, which requires professional skill and expertise.
Keep scrolling down this article to learn in detail how small business organizations can ensure bank reconciliation without any error or misunderstanding.
Top 8 Steps You Should Follow for Proper Bank Reconciliation
Bank reconciliation is one of the most critical parts of the operations of any business organization, irrespective of its scale. It is necessary to reconcile the accounts on a daily basis; however, if you cannot do it daily, doing it on a weekly and monthly basis is more than essential. The longer you delay the task, it will become more complicated and difficult, so make sure to get done with your responsibility as soon as possible.
Here are some of the major steps small business organizations should follow for proper bank reconciliation.
1. Get You Bank Records
The first step you should follow for proper bank reconciliation is getting your bank record. You need to get the details of your amount deposited and withdrawn from your business accounts, as well as the details of the categories under which the specific action is made. So, make sure to get the transaction details for both credit card and current accounts.
2. Get Your Business Records
The next step in ensuring smooth bank reconciliation is getting your business records. These can include your income and expense ledgers, logbooks, or spreadsheets. Managing business records is not easier and requires professional expertise. So, a lot of organizations hire the best accounting firms in Dubai and let the experts handle business and bank accounts while they sit back and enjoy success. You can also explore the option if you are unsure of your expertise.
3. Identify Starting Point
Identifying the starting point is the next step that you essentially need to follow for bank reconciliation. Identifying the starting point means finding the point from where you need to start the reconciliation process. For this, check the last time you reconciled your accounts and up to which point you did that. Pick the next date or point to start new reconciliation.
4. Review Bank Deposits
The next step in the process of bank reconciliation is reviewing bank deposits. The deposit should appear as income in your account. Make sure to review and enter the missing details. Moreover, it is extremely important to sort out the details like sales, refund, interest, or others for better record maintenance.
5. Review Your Income
Once you have reviewed your bank account, it is no time to review the income in your business books. Check the details of each and every single entry and see if it matches the deposit on the bank statement or not. Pay special attention to this step so you do not end up missing the details of bounced payments, which can lead to loss if not spotted on time.
6. Recheck Bank Withdrawals
The next step you need to follow for bank reconciliation is rechecking the bank withdrawals. The bank withdrawals can also include trivial details like the bank fees because they can make a huge sum at the end of the day or month. If you fail to account for them in your books, you will be spending significant time on their tracking.
7. Check the Expenses
Another significant step in the process of bank reconciliation is checking the expenses on your books. The entries should match with the withdrawals on the bank statement. If there is some missing payment, check it has been made through cash or a different account and sort out the details.
8. End the Balance
The last step you need to follow for smooth bank reconciliation is ending the balance. Once you have checked and matched all the details of your business and bank account and ensured that there is no ambiguity or difference, you can end the balance. It will notify that the bank account is reconciled to that point. On the other hand, if you are too busy to handle it or lack expertise, make sure to hire experts to take charge instead of delaying the matter.
Follow the process or hand over responsibility to professionals!
If you think you can handle the responsibility of reconciling bank accounts on a daily basis, which is well and good. However, if you have even a little doubt, make sure to consult professionals and let them take care of the matter, as at the end of the day, it will hurt your profitability and progress.