Bank Reconciliation Statement: What you need to know

Bank reconciliation is a process frequently used in corporate accounting to verify the correspondence of transactions between a bank statement and a specific bank account. Its implementation is of great importance in the daily management of a company's finances. Indeed, the bank reconciliation allows a precise follow-up of the cash flow, the detection of possible errors of accounting entry and facilitates the management of the customers reminders.

In this article, you will discover a clear definition of the bank reconciliation statement, as well as a list of key steps for setting it up within your accounting. We will also share tips and tools that will simplify the bank reconciliation process in your company.

What is a bank reconciliation statement?

Bank Reconciliation Statement: Definition

Bank reconciliation is a careful comparison between bank statements and a company's bank account (account 512) to ensure consistency of all transactions and reliability of accounting. By performing a bank reconciliation, finance teams are able to identify any discrepancies between bank entries. The bank reconciliation statement then allows for the rectification of any discrepancies by updating the entries, while closely monitoring the company's cash flow.

To perform this control, it is essential to analyze the transactions appearing on the bank statements and in the bank account over a given period. At the end of the day, the balances of these two accounts must be in balance. The bank reconciliation statement is the control document that materializes this bank reconciliation process. It should be noted that this accounting process is not mandatory, but it is highly recommended as a control tool, allowing to obtain a precise vision of the cash flow situation at a given time.

Why is it important to do a bank reconciliation?

The bank reconciliation statement is of major interest in terms of detecting possible accounting entry errors, especially when the amounts of the two balances do not match. By performing a thorough review of transactions during this check, it becomes easier to identify errors, double entries and omissions.

The regular establishment of a bank reconciliation has the advantage of allowing a precise follow-up of the company's cash flow. It provides a clear view of pending payments and uncharged expenses. This is particularly useful for determining the right time to send out customer reminders, for example.

Finally, the regular implementation of a bank reconciliation statement allows finance teams to save time when preparing the balance sheet. Tracking and verifying bank transactions over an entire year is a complex and time-consuming task. By performing periodic bank reconciliations, this task is simplified and facilitates the preparation of financial statements.

When to perform a bank reconciliation?

Depending on the complexity of your structure, it is strongly recommended that all companies periodically perform a bank reconciliation. Ideally, performing a bank reconciliation at the end of each month will ensure cash flow and allow time for customer reminders, if needed, to obtain prompt payments. However, for small and medium-sized businesses, preparing a bank reconciliation statement two to three times a year may be sufficient. It all depends on the nature of your business and its specificities.

It should be noted that companies that regularly perform bank reconciliation have reliable steering indicators, which greatly facilitate complex decisions. These indicators provide a clear and precise view of the financial situation, which allows strategic choices to be made with confidence.

Is there a difference between a bank reconciliation and a bank reconciliation?

The term "bank reconciliation" is a synonym for "bank reconciliation". In all cases, it is the accounting process that aims to verify the concordance between the bank statements and the bank account of a company.

Key steps in bank reconciliation

Gather all the documents you will need

When performing a bank reconciliation, the first step is to gather all the documents needed to analyze the transactions. This initial step is very important in order to save time in the further process. To give you an idea of the list of documents that are essential for the preparation of the bank reconciliation statement, here are some examples:

Account statements covering the study period;

• Bank statement 512 ;
• Proof of payment of transactions made on the bank account (checks, receipts, etc.);
• The last bank reconciliation performed, if applicable.

Establish starting balances

At this stage, the goal is to determine the initial balances of the bank account and bank statements, in order to start from a sound basis. Throughout your bank reconciliation process, this numerical information is the foundation on which you must build. It is important to remember that the objective of this accounting control is to obtain a balance between the two balances after analyzing all the bank transactions. If, at the outset, you find a discrepancy between the two balances, we recommend that you perform a bank reconciliation with reference to the previous period. This will establish continuity and rectify any potential inconsistencies.

Point out the operations

The second step of the bank reconciliation is the most time consuming part of the process. It involves the meticulous analysis of every transaction on both your bank statement and your bank account. The goal is to find a perfect match between the transactions on the two documents examined.

To simplify your task, there are tools specially designed to automate the reconciliation of your transactions. These tools synchronize with your bank and save you valuable time at this stage of the process. By using these solutions, you can significantly reduce manual work and the risk of errors, while optimizing the efficiency of your bank reconciliation.

Perform the bank reconciliation statement

The bank reconciliation statement is usually presented in two separate tables. In one table, you will find the transactions related to bank account 512, while in the other, you will find the transactions indicated on the bank statements. These tables should include a detailed list of debit and credit transactions and the corresponding amounts. The bank reconciliation is considered complete and validated when the difference between the two balances is zero.

These tables provide a clear and synthetic view of the transactions performed, making it easier to identify matches and possible discrepancies between the two sources of information. By achieving a zero discrepancy, you can be confident that all transactions have been properly reconciled, thus enhancing the reliability of your bank reconciliation statement.

How do you establish a bank reconciliation?

Perform a bank reconciliation manually

To perform a manual bank reconciliation, it is possible to use a spreadsheet program, such as Excel for example. The use of spreadsheets makes it easier to set up your bank reconciliation report, allowing you to trace bank transactions in an easy way. With a spreadsheet, you have the flexibility to create your own spreadsheet template with ease.

However, it is important to note that performing a bank reconciliation manually does not guarantee optimal security of the encrypted data. A simple typing error or a misplaced comma can have a significant impact on the accuracy of your control. In addition, the manual preparation of this document requires a significant investment of time. This can hinder the ability of accounting teams to focus on their core business, namely financial analysis and consulting.

With this in mind, it is recommended to explore automated solutions specifically designed for bank reconciliation. These solutions offer increased data security, reduce the risk of human error and allow professionals to focus on higher value-added tasks

‍Delegatethis task to a certified public accountant

Outsourcing this tedious task to an accounting firm has many advantages. First of all, it saves you time while ensuring a reliable and professional result. Entrusting your bank reconciliation statement to a team of accountants also allows you to focus on other essential aspects of your business.

It is important to note that the services of a chartered accountant entail a financial cost that should be taken into account in your budget. However, it is essential to consider this investment as a way to ensure quality accounting management, minimize the risk of errors and benefit from sound financial advice.

By delegating your bank reconciliation to competent professionals, you free yourself from operational constraints while benefiting from their expertise and experience. This approach allows you to benefit from a rigorous work, carried out in compliance with the accounting standards in force, and to concentrate on the growth and development of your company.

Use intelligent accounting or financial management software

If you'd rather avoid manually reconciling your bank statement or hiring a CPA, you can turn to smart financial management software. These tools offer various advanced features such as automatic bank reconciliation, access to financial reports and simplified expense reports. Regate's integrated platform offers a number of such features to simplify bank reconciliation . 

‍Tricks to simplify your bank reconciliation statement

Automate your bank reconciliation

To go faster, to have a clear vision of its cash flow at a moment T and to avoid the errors of seizure, we advise to all the companies to automate the establishment of a statement of banking reconciliation. Turn to a financial management platform such as Regate, which will allow you to aggregate your bank data to facilitate the reconciliation.

Get into the habit of doing it periodically

It is important to perform regular bank reconciliations. Keep in mind that up-to-date financial management promotes the health of the company.

Bank reconciliation statement: what you need to know

The bank reconciliation is a process generally used within the framework of the control of the accounting of a company. It consists of verifying the concordance of the operations between the bank statements and the bank account 512. Thebank reconciliation report represents the materialization of a bank reconciliation process.

Companies can perform a bank reconciliation manually, through an accounting firm or by using automated bank reconciliation tools. The key is to perform this process periodically to detect potential data entry errors and ensure that cash receipts are credited and cash disbursements are debited.

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