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A bank reconciliation is the process of matching your business’s accounting records (like your cashbook or accounting software) with your bank statement to make sure everything adds up correctly.
Why is it Important to Do It Regularly?
Doing bank reconciliation every month (or regularly) is important because:
- Catch Mistakes Early
You can spot any errors made by the bank or yourself—like duplicate payments, missing deposits, or incorrect entries. - Detect Fraud or Unauthorized Transactions
If there are suspicious or unknown transactions, you’ll notice them quickly and can take action. - Know Your Real Cash Position
Your bank balance and your accounting records may not always match due to things like uncashed cheques or pending payments. Reconciliation helps you know exactly how much money is really available to spend. - Ensure Proper Record Keeping
It keeps your accounts accurate and clean, making things easier during tax season or if you need to apply for loans. - Improve Business Decision Making
With up-to-date and accurate financial records, you can make better decisions about spending, investing, or cutting costs.
In Short
Bank reconciliation is a simple but powerful tool to make sure your business finances are accurate, protected, and under control. Doing it regularly helps you stay one step ahead.