Reconciliation is the most important term in accounting industry. Sadly, people aren’t aware of this. So what does this term mean? Here let me define it – reconciliation basically is an accounting process through which SMB and accountants perform to ensure that the accurate balances are recorded in accounting books. Before I talk more about reconciliation in accounting, let me take you back to the history of reconciliation.
In old times, reconciliation accounting was a relatively manual process, which used to happen in Excel spreadsheet or on physical piece of paper. With the introduction of cloud technology, the accounting software and tools made this process much easier making your task completed on time with full efficiency.
Let’s dig deeper and talk more about accounts reconciliation.
How accounting reconciliation works?
As I told you today’s accounts reconciliation has enhanced the way what people used to manually in earlier times. Now you can use software, cloud technology, and accounting tools to reconcile accounting works. Below I’m going to talk about some ways make sure to read all of them.
- – Firstly, you have to compare your internal account register to your bank statement. Just make a note of all transactions on your bank statement.
- – Check out all the outgoing and incoming funds records and your bank account.
- – After this make sure to check if there is any error occurs on your bank statement or not. Make sure to properly and clearly add or subtract from your account balance.
- – Finally ensure that your account balance is accurate.
These are the only ways accounting reconciliation works for you. Let’s now dig deeper and talk more about reconciliation.
The types of account reconciliation
Guys, there are different types of accounts reconciliation available that can accurately perform a personal as well as business task. The best thing is that you can automate any of the given type of reconciliation.
✪ Customer reconciliation
As a business, if you offer credit terms to your customers, then the customer reconciliation examines if accounts receivable ledger is sync in general ledger account.
✪ Bank reconciliation
This is one of the most famous and commons reconciliation available. In simple words, bank reconciliation is the process where businesses check their cash position. How do they do that? Basically, they compare the value of bank transactions internally with the statement from the bank.
✪ Vendor reconciliation
The third type in the list is vendor reconciliation. It reviews supplier-provided statements and balance owned with the payable ledge. So overall balance internally checked.
✪ Business specific reconciliation
As the term suggests, there are many types of reconciliation you will see based on business specifically. For instance, a company wants to reconcile their inventory stock on balance sheet by manually. There would be many more type of reconciliation based on specific business needs.
Want to know why you should reconcile accounts?
In this section, I will tell you why as a business owner you should go with reconciling your accounts. Just keep on reading below.
✰ Maintain accuracy
As a business owner, you will surely want to maintain the accuracy in your business, right. That’s what account reconciliation works. With this method, you’re able to record bank statement, financial transactions, and other money related tasks accurately. You can rest assured everything.
✰ Prevent risk
Since accounting is one of the most delicate industries, right. With the advancement of technology, hacking, spamming and online fraud are at peak. To prevent business from such things, you need to reconcile your accounts. This is how you prevent risks associated with fraudulent activities.
✰ Adhere to regulations
Next important reason which compels you to reconcile your accounting is adherence to government regulations. To show your records to government, your balance sheet must be right and accurate. If you report wrong balance sheet, it will cost you a lot both financially and goodwill of your accounting firm may go down.
Bottom line on accounts reconciliation
After reading this article, we can say that accounts reconciliation is an important aspect for any business that wants to maintain its finances accurately. There are many benefits you can avail such as reduction in errors, fraudulent activities, increased employee satisfaction, have full internal control over your accounts and much more. You can also go with accounting services in San Diego at most reasonable price in the country.
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