Daily Bank Reconciliation – Why It’s Necessary

Written by Trovata Team
February 24, 2020

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Let’s be honest, working through a month-end bank reconciliation is miserable. We know that the process is vital to the financial health of the company. Yet, the monotonous nature of the reconciliation process can lead you to put it off or do a reconcile-ish process. News flash: merely checking for similar numbers on the general ledger and bank statements is not going to do your company much good. There is a better way to do this and it might shock you.

Run through bank reconciliation every day.

WAIT. Before you reach for the torches and pitchforks, let me explain. Controllers know the process well: logging in to multiple online banking platforms and sifting through hundreds of transactions until it all adds up. By reconciling everyday you minimize the time spent by reducing the number of transactions you are looking through. Just in case you aren’t convinced here are the top five reasons for daily bank reconciliation.  

Daily Bank Reconciliation

Nip fraud and bank errors in the bud.

According to Forbes, “While banks generally reimburse consumers for any theft related to personal credit cards and accounts, that is not always or even typically the case with business accounts which don’t have the same protections.” This means if you leave fraud to fester, your company could be on the hook for the loss. By working through bank reconciliations daily, it is possible to catch fraud and cash flow leaks immediately.

People aren’t perfect and neither are banks. Bank records are still susceptible to human error and if you aren’t checking the validity of your transactions, you could be letting mistakes slip.

Don’t test your patience; frequent reconciliations mean less transactions and less frustration.

The more frequently you run through your bank statement the easier it gets. Not only do you know what to expect, but you know the red flags. Since you’re not looking through a month’s worth of transactions, it makes the process as quick and painless as possible.

Monthly bank reconciliations leave you working with outdated information.

Monthly bank reconciliations leave room for discrepancies between your accounting records and your actual cash balance. This leaves you susceptible to bouncing a check and incurring overdraft fees. Bouncing a check has more consequences than the annoyance of re-sending payment. Failed payments can damage partner relationships and lead to strict repayment options in the future. Reconciling daily also helps avoid unnecessary overdraft fees. Cash is the lifeblood of any operation, don’t give it away when you don’t have to.

Books ≠ Reality.

Under the accrual system, you can debit an account when you finish a project. The books will reflect payment, but a bank reconciliation will show whether or not the payment has actually been received. In addition, QuickBooks highlights another common discrepancy between the accounting books and the bank record. “There are bank-only transactions that your company’s accounting records most likely don’t account for. These transactions include interest income, bank deposits, and bank fees.” Monthly reconciliation leaves you playing guessing games with your cash balance. If you don’t reconcile frequently, you are making business decisions with outdated information.

Track your cash flows, and gain insight into spending habits.

Spending on shipping or even the occasional office coffee/donut run impact the bottom line. The little things can add up quickly when unmonitored. Having a solid understanding of cash flow is critical to being able to forecast and plan for future financial position. Daily monitoring gives you a better understanding of your cash flow and spending habits.

You don’t need to be a company with high volume transactions to do daily reconciliations. With daily reconciliation, the process doesn’t have to be draining. Cut the number of transactions you need to sift through and use tools like automation technology to further lighten the workload. Trovata can help you by putting all of your bank transactions in one place; which means no more multiple websites and logins. Need to identify troublesome or missing transactions? Trovata has a Google-like search tool that allows you to find and tag specific transactions. Bank reconciliation is a tedious process, but Trovata can make it simple.

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