Account reconciliation is when you compare your accounting records to the bank-provided financial statements. Essentially, you’re looking to make sure the information, transactions, and dollar amounts match. It’s one of the easiest ways to identify errors or detect fraud.
Why you need account reconciliation
Cash flow is a constant challenge for small businesses. Three-quarters of entrepreneurs feel they need more cash, and the second-biggest reason they fail is that they run out of it; 20% of small businesses inevitably fold in their first year.
Performing account reconciliations throughout the year allows you to avoid adding hours of extra work at tax time. So instead of manually going through months-old records, you can focus on other elements of your business and enjoy peace of mind knowing you’re tax-ready.
Run your business more effectively
If you notice errors regularly, it’s likely there’s an opportunity to improve your business operations. By avoiding making these errors, you can run processes more smoothly and be confident in your records.
Fraud is the top payment-related challenge businesses face. Account reconciliations can help you identify fraud before it gets out of control, saving you money and avoiding further complications down the line.