Bank reconciliation is an important business process with key benefits and challenges that need to be addressed. Read more in our latest article.
Simply put, bank reconciliation is a business process that is undertaken to ensure the cash held by a business adds up to the same figure as the cash balances in the company’s accounts. With cash flowing via a variety of channels, such as online payments, this can often be a complex process. All transactions and balances must be examined, and any discrepancies highlighted, to be looked at in more depth, to justify and align the mismatches, in order to give an accurate depiction of the current cash flow status.
The Bank Reconciliation Process
Bank reconciliation can be broken down into three stages. First, the cash balances and transactions on the bank statements must be compared with their counterparts on the company books. This usually brings up discrepancies due to outstanding payments, fees, cut-off dates, and various other reasons. The next stage involves adjusting the balances, so they match up with each other, and the third stage is to record the processes of reconciliation that have taken place.
The Benefits of Bank Reconciliation
Bank reconciliation is an important aspect of any company’s accounting processes. It will make sure that all payments have been made successfully and help keep track of mismatched payments, for example, a cheque that someone forgot to cash that was banked months after it was issued. It keeps accounts simple, putting the business in a better position for any assessments or tax audits. It is useful in bringing to light errors, which can then be looked into in more detail and rectified. It also helps to pinpoint cash flow issues, detecting problems early before they become larger issues.
Bank Reconciliation – The Challenges
When it comes to the resolution stage of bank reconciliation, several challenges can arise. Some of the most common issues include uncleared cheques, both sent out by the company, and received by the company, cheques that have been voided but then are cleared by the bank, and returned cheques. A cheque can be returned for a variety of reasons such as a lack of signature on the cheque, or a cheque that has expired because it was never deposited in a bank. There can also be issues with unknown and changeable quantities such as bank fees and interest rates. Tracking down all these problems can be a real minefield.
Bank Reconciliation Made Easy with NetSuite
For many businesses, bank reconciliation is an arduous and time-consuming process. It can get even more complicated when you’re dealing with a high level of transactions, across several bank accounts, and when you’re accepting or making payments in various different currencies. The key to overcoming these issues is automation, and that’s where the innovative NetSuite Cash Management becomes invaluable. This cutting-edge technology allows businesses to automatically import banking data, eliminating manual comparison processes. Already proven to be highly effective, and currently used by many large businesses across the globe, NetSuite can simplify your bank reconciliation processes through efficient automation.
Interested in finding out more?
As a leading NetSuite Solution Provider, NetU can bring a wealth of valuable knowledge to your business, to help you get on the right track with this powerful software and make future bank reconciliation processes easy and stress-free. To find out more, visit our website today and book your consultation with a NetU expert.