The Importance of Bank Reconciliations

By: Andrew Roffe, Staff Accountant

We are often asked what a bank reconciliation is and if we perform them. The answer is yes, we do and more information about what this practice entails is the topic of this blog.

Bank reconciliation… or a “Bank Rec” as you may hear it referred to…  is the practice of comparing your company records against bank records. Bank reconciliations are used to check for any variances between the two sets of records. It is normal to have minor variances between the company records and a bank’s record, which is usually caused by timing, bounced checks, checks in transit, and accounting errors. A reconciliation should easily explain these minor variances.

Bank reconciliations are also a key aspect of an internal control system and are necessary in preventing and detecting fraud. A proper internal control system will have multiple people in the accounting department involved in the cash cycles to create a segregation of duties. The person who performs the reconciliations should not be the same person that records the transactions in the accounting records or processes cash disbursements or receipts.

If your company undergoes an audit, the auditors will examine the company’s ending bank reconciliation as part of their testing procedures. The reconciliation offers a verification of the accuracy and completeness of the accounting records of the business.

Bank reconciliations are recommended to be performed at least monthly but may be performed more frequently. It may be necessary for a company running on minimal cash reserves to perform multiple bank reconciliations in a month. An organization may perform daily reconciliations if they suspect that someone is committing fraud.

For more information about bank reconciliations or internal controls, reach out to us today. We would be happy to assist you.