Bank Reconciliation – A Must for Small Business Accounting
Bank reconciliation could be termed as one of the basic and prime control factors while performing accounting and bookkeeping for any business. For a small business, bank reconciliation plays a more vital role as generally there are no explicit control mechanisms in place for a small business and hence reliance on bank reconciliation like tools could not be ignored.
In a lay man’s terms – A Bank reconciliation ensures that whatever needs to be paid – has been paid and what was due to be received has been received. This is one of the biggest hurdles faced by a small and medium sized business enterprise as it is not always possible to ensure the realisation and payment status of customers and vendors by scanning through the bank statements or the cash book register. Unless and until, a business keeps a close eye on the movement of its liquid assets, managing the working capital cycle may also become relatively more complicated. Hence, ensuring proper bank reconciliation for all business bank accounts, credit card accounts and merchant payment gateways like PayPal, CC-avenue, E-Way etc is essential to ensure the status of receipts and payments done to take proper business decisions.
The importance of bank reconciliation becomes even more critical for a B2B small business scenario where sales are generally done on credit and the payments are realised on a later date. Bank reconciliation performed on a regular basis ensures the stakeholders’ know the status of the accounts receivable and payables so that required business actions could be executed.
Normally, bank reconciliation is performed on a monthly basis by small businesses; however, it is always advisable to have the bank reconciliation up to date bi-monthly. The access to online bank account statements and real time bank feeds has made it possible to perform the bank reconciliations even on a daily basis.
Bank reconciliation being a critical aspect of accounting process, shall be performed by accounting professionals to ensure its correctness and accuracy. Today, bank reconciliation is also being considered for outsourcing by business set ups across the globe and availability of online bank reconciliation platforms and access to bank statements has made bank reconciliation outsourcing a reality of today. All major accounting packages including Quickbooks Online, XERO, MYOB, Sage and custom made ERP packages are offering bank reconciliation tools which could be worked upon by accounting professionals with ease to ensure the reconciliation is proper, on time and efficient for business decision making.