Is it Really Important to Reconcile the Bank Statements Before Issuing the Monthly Financials?

The very first step I always take toward preparing monthly financial statements is to reconcile the bank statements. Without this process, you cannot know if the information you are presenting is accurate. Two important benefits can be gleaned from the reconciliation process.

First, it helps ensure that all transactions have been recorded in the general ledger. By comparing the transactions that cleared the bank with the transactions recorded in your general ledger, you know if everything has been included. You will also want to verify the numerical sequence of all checks written during the month, including the voided checks, to be sure that they have all been recorded. If you receive copies of the deposit slips, remember to verify that the cash portion of each deposit agrees with the cash received as shown in your count sheets.

Secondly, bank reconciliations help safeguard your assets by making sure that there is no unauthorized use of company funds. All cancelled checks should be examined to make sure the payee is a vendor of your organization and that the signer is an authorized check signer. Don’t forget about those bank drafts and electronic withdrawals; it is too easy today for someone to make a withdrawal from a bank account with minimal confidential information. To prevent this, we recommend that you compare the withdrawals on the bank statement with the invoices that support the disbursement. Fraud sometimes occurs when the bookkeeper decides to pay her personal bills out of her employer’s bank account!

Once you have ensured that your bank statements are reconciled, you are ready to complete those monthly financial statements. Reconciling your bank statements each month can enable you to exercise good fiscal responsibility and to be good stewards of the riches that have been entrusted to you. If you need other helpful hints to develop good internal controls, please contact us at 281-399-8153. We would love to tell you about our review of internal controls or just answer your questions.