I have discovered that many small business owners do not know what a bank reconciliation is. Very simply, it is comparing your bank statement with your financial records (ex. QuickBooks file) to ensure all business transactions are “accounted” for. If done properly, it can:
- ensure no transactions are missed
- remove duplicate entries
- correct typos
- catch fraudulent/erroneous activities
In my experience, we have caught employees double depositing their pay cheques using image depositing. Another instance of a Lease company taking out a monthly pre authorized payment AFTER the lease was already paid out. Twice I’ve encountered fraudulent credit card purchases that would easily be missed on a 5 page credit card statement EXCEPT for the fact that the Reconciliation process caught the offending purchases. We are all human and sometimes we may even transpose numbers or mistype the total by mistake. In my opinion, doing bank and credit card reconciliations is NOT an option but a necessity if you want good clean books. And good clean books lead to valuable reports with figures that are true and meaningful.
So you tell me…are you wasting your time?