If you’ve ever received an unexpected bill or bank balance, you understand the importance of account reconciliation. It’s a critical part of the accounting process that ensures your business’s figures are fully balanced. Account reconciliation compares financial records against your actual bank balance, and while it’s not always easy, it’s vital to your e-commerce business.
Risks of Ignoring Reconciliation
Without routine account reconciliations, businesses face the dangers of undetected fraud, unauthorized withdrawals, or banking mistakes, problems which, left unaddressed, can impair operations and drain a company’s cash reserve. Facing an unexpected low balance means having to deal with rejected electronic payments and bounced checks, and failure to pay can damage relationships with suppliers and business partners, leading to higher costs and stricter terms of payment.
Business accounts do not have the same legal protections as consumer accounts, which means fraud usually isn’t covered by banks. It is up to businesses to identify and halt fraudulent use on their own. Without routine reconciliation, This kind of monitoring isn’t possible.
How often should you reconcile with your bank?
While all businesses must reconcile their accounts, the frequency at which they do so varies. Typically, the larger the company, the more often books need to be reconciled. The opposite is true for smaller businesses – they may reconcile books less frequently.
Due to the time-consuming nature of the process, overstretched business owners wearing many hats may devalue the importance of routine bank reconciliations, but no matter how frequently you reconcile your accounts, doing so on a regular basis will help you stay on track.
Monthly Reconciliation
In general, businesses should reconcile their books with their bank at least once every month. This is the easiest schedule to keep since monthly bank statements are easy to come by and simple to organize.
Monthly reconciliation offers the flexibility to take care of your accounts when it is convenient for your team. Seasonal businesses or those with responsibilities that fall more heavily during one time of the month may decide to perform their reconciliations to a less busy time.
Daily Reconciliation
If your business experiences larger volumes of transactions or a higher fraud risk, you should perform bank reconciliations more frequently. In these cases, daily bank reconciliations are a more suitable technique to make sure that money is moving in and out of the business appropriately.
Daily bank reconciliations can uncover incorrect transactions before the money leaves your account and allow in-house teams to more easily stop fraud. However, if the thought of daily reconciliation is overwhelming to you, you probably don’t need it. Most businesses whose transaction volume is high enough to warrant daily monitoring have specialized teams whose sole duty it is to protect the company’s bank accounts.
Work With Us
Account reconciliation is unavoidable, but it doesn’t have to be challenging. If you’re looking for help reconciling your books, get in touch with us for a free proposal call.