One of the negative habits small business owners need to break is not balancing their bank accounts. For a small business, regular bank reconciliation is essential to identifying errors, preventing fraud, and confirming cash flow. Accounting firms in Dubai can help you with this important activity if you lack experience with bank reconciliation or are unable to complete it correctly.
Bank reconciliation statement preparation may seem tedious or time-consuming to business owners. However, carrying out a bank reconciliation entails much more. This blog post will cover the definition of bank reconciliation, how to create a bank reconciliation statement, and how frequently your business has to perform bank reconciliations. Continue reading to learn insightful tips:
What Do You Mean by Reconciliation of the Banks?
If your business hasn’t yet performed a bank reconciliation. Please allow us to explain. A crucial accounting process called bank reconciliation involves corporations comparing their bank statements to the transactions noted in their financial records. An organization can verify that payments have been made and cash receipts have been put into a bank account by comparing bank statements with financial statements.
In a bank reconciliation statement, the deposits, withdrawals, and other transactions that influence a bank account over a given time period are listed. Businesses can utilize bank reconciliation statements to identify and correct potential bookkeeping or transactional problems. It is a potent instrument used by businesses to combat fraud. You can obtain additional information on bank reconciliation statements from accounting firms in Dubai.
How Frequently Should Bank Reconciliations Be Done?
You should execute bank reconciliation at least once a month, according to accounting firms in Dubai. Since banks often send monthly statements at the end of the month, which may be used as a basis for reconciliation, the majority of firms perform bank reconciliation after the month has ended. However, since businesses can now quickly access their bank statements through online banking services, they should reconcile their accounts every time they receive a statement from the bank, whether that be weekly, daily, or at the end of the month. Outsource your organization’s bank reconciliation needs to firms offering accounting services in Dubai if you’re having trouble doing it right.
What Justifies Bank Reconciliation?
You can find and explain conflicts between entries in your accounting system and the related transactions listed on your bank statement by using a bank reconciliation statement. Here are some strong arguments in favor of routine bank reconciliations:
- Errors like multiple payments, missed payments, calculation errors, etc. can be identified.
- The accounting books can be updated with bank fees and penalties thanks to bank reconciliation.
- Businesses can identify theft and unauthorized transactions.
- You can monitor your company’s accounts payable and receivable.
- You can identify subscriptions you intended to cancel as well as bank and credit card costs you might not be aware you are being charged by regularly performing reconciliation.
- It will provide a precise cash flow situation for your business.
- Businesses can discover potential check clearance delays with the help of bank reconciliation.
How Should a Bank Reconciliation Statement Be Prepared?
To create a bank reconciliation statement, an organization’s finance and accounting staff often take these steps:
Step 1: Evaluate the general ledger and the bank statement.
Step 2: Adjust the general ledger
Step 3: Modify the cash balance.
Step 4: Evaluate the balances and, if necessary, add journal entries.
What Issues Arise Frequently During Bank Reconciliations?
When executing bank reconciliations, businesses could run into various difficulties. Infrequent reconciliation makes it more difficult to resolve issues as they develop since the necessary data may not always be accessible. Additionally, the chance of a mismatch increases when transactions are not immediately recorded and when bank fees and penalties are in effect. By working with the top accounting firms in Dubai, United Arab Emirates, you can simply overcome such difficulties.
Consult the best accounting firms in Dubai, United Arab Emirates.
By performing routine bank reconciliations, you can identify mistakes, omissions, and fraud to help you make better business decisions. To do effective reconciliations, small businesses with limited resources might engage accounting firms in Dubai like Intellect Chartered Accountants (ICA). The ideal option for firms is to outsource accounting services to Dubai since they can access a wide range of services, including corporate tax, VAT return filing, audit, ESR, AML, and budgeting, all under one roof.
The leading accounting firm in Dubai with over 15 years of expertise is ICA. We have worked with clients in every sector, including manufacturing, retail, and online sales. The highly skilled staff at ICA can investigate your unique accounting or tax problems and offer a solid resolution. Utilize ICA’s accounting & bookkeeping solutions to make accounting hassle-free.