Reconciliation is a basic accounting technique that assures that the money spent or earned at the end of a fiscal period equals the money leaving or entering an account.

Accounting reconciliation is a critical activity for both firms and individuals since it allows them to check for fraudulent behaviour and avoid financial statement inaccuracies. As part of standard accounting operations, reconciliation is usually performed at regular periods, such as monthly or quarterly.

How Reconciliation Works

It is a good habit to reconcile an account at the conclusion of each fiscal month and quarter. Businesses and individuals reconcile accounts to ensure that each transaction adds up to the correct ending account balance. Reviewing papers and reviewing analytics are the two most common techniques to reconcile an account.

Reconcile Bank Statements for the Following Reasons

Bank reconciliation is a critical process for any business. The main purpose of reconciling your bank statement for small businesses is to guarantee that your business's recorded balance and the bank's recorded balance match up. It also assists in the management and monitoring of your cash flow.

Other reasons why firms should balance their bank statements each month include:

Detecting fraud: When reconciling transactions in your bank account, look for signs of fraud first. Have any of the checks you've issued been duplicated or altered? Were checks written without permission? Were there any unlawful withdrawals from the account? Is there any money missing from the account?

Validate the entry of data: You can identify any abnormalities in your bank statements by reconciling them, such as entering incorrect amounts, duplicating entries, and other data entry problems.

Confirm the correctness of financial statements: Banks sometimes make mistakes, although it's rare. One technique to ensure that your financial statement matches your bank statement is to reconcile your bank statements.

Tax reporting accuracy: You must reconcile your bank statements in order to compile a valid tax return.

Theft prevention: Reconciling your bank statements might help protect your organisation from theft by workers or others.

In general, reconciling bank statements can assist you in identifying any odd transactions that could be the result of fraud or accounting mistakes. This procedure can be followed in a formal or casual manner.

This is true for both organisations and individuals, who should double-check each transaction, ensuring sure the sums are correct and, if not, noting any discrepancies that need to be investigated further.

Consequences of Neglect to Reconcile Your Bank Account

If there are any discrepancies between the accounts and the figures, they must be clarified. Reconciling your bank statements allows you to spot issues before they become a major issue.

Above all, balancing your bank statements allows you to detect fraud before it's too late. It's crucial to remember that consumers have more protections under federal law than businesses when it comes to their bank accounts. As a result, it is critical for businesses to discover any fraudulent or suspicious behaviour as soon as possible—they cannot always rely on the bank to cover fraud or account problems.

Advantage of Reconciliation

Services that are both cost-effective and low-risk

You can save money on operating costs by reconciliation outsourcing general ledger reconciliation services instead of investing in software, resources, infrastructure, or technology. You won't have to worry about the cost of hiring and training an accounting team because the reconciliation outsourcing provider will use their existing team of skilled accountants. The financial service provider will also use the most up-to-date accounting software and technology, which will save you a lot of money on infrastructure.

High-quality services with a 100% accuracy guarantee

Every business is concerned about low-quality work while outsourcing. This, however, is not the case. You don't have to sacrifice quality by outsourcing general ledger reconciliation services. Fundtec and other outsourcing service providers only hire resources after a rigorous recruitment process. The new accounting team is then given extensive training before beginning work on any project. There are numerous stages of Quality Assurance tests that the work goes through during the course of an accounting project to ensure 100 percent accuracy. As a result, when it comes to general ledger reconciliation services, you may anticipate perfect quality even if you don't outsource.

Work is completed ahead of schedule

When you outsource accounting services to India, you can take advantage of the country's 12-hour time difference. Outsourcing, contrary to popular assumption, can expedite the completion of your task because your night time is India's day time. Because of the time zone difference, you can submit your work at the end of the day and receive the finished general ledger accounting files the next morning. You can make key business decisions without delay because your accounting job is finished at such a rapid rate.