Question

Why is it critical to reconcile the bank statement on a timely basis each month?

Answer 1

Solution:

Bank reconciliation is very important for any kind of business and this such reconciliation should be done on monthly basis to have better control system. It is very critical to reconcile bank statement on monthly basis due to following reasons:

1. Catching Errors:

Even if you implement strict control measures, still there is possibility of human errors. If companies fails to reconcile their bank statements every month, these errors will not be detected and they could be costly. The reconciliation process helps provide a double-check to stop mistakes.

2. Following Up on Transactions:

If vendors are complaining about not receiving funds, it could be possible that a check was lost in route. When we reconcile bank statement every month, we can catch checks that have not cleared, and this will help you track down any potential missing payments.

3. Keeping a Close Eye on Company Performance:

When owners do not take the time to reconcile their bank statements personally, or at least see an overview of the results, they may be unaware of potential income issues or shortfalls.

4. Loss Prevention:

When bank statements are not monitored and reconciled, the potential for undetected loss is high. All employees in company are not honest, and Organization may not miss money that has been taken for some time. This is how some employees are able to embezzle thousands if not millions of dollars over time. Reconciling bank statement helps you prevent losses.