Business Finance

Corporate finance: what is it and how to do bank reconciliation?

If we visited a bookstore in search of books on “financial success,” we would probably have enough publications to build a house with books instead of bricks. Experts and publishers sell successful formulas as if they could be hidden in the sleeves of their jackets.

However, the truth is that there are no shortcuts: a company’s growth depends on excellent financial management, which includes knowing how to do bank reconciliation.

Despite receiving little attention from entrepreneurs and experts, bank reconciliation is one of the essential tools for financial management. Do you want to understand how it works and how to proceed in case of disagreements? Come with us!

What is bank reconciliation and what are its benefits?

Bank reconciliation can be defined as a comparison between the entries, exits and balances of an account at the bank and the expected movement of expenses and revenues of your company.

With it, it is possible to check the entries brought by sales with cards and those related to sales with boleto bank. This monitoring can be done week by week, every month or every six months, and is highly recommended to all companies that deal directly with commerce.

Reconciliation also allows:

  • to avoid that the company stays with insufficient funds in the account, which entails the collection of high bank fees;
  • make forecasts in the company’s cash flow;
  • avoid that suppliers are not paid;
  • know if customers are paying on time and identify defaults.

The construction of a realistic budget planning is one of the major advantages of this control, as it allows the company to institute a policy of transparency thanks to the synchronization of data.

This practice gained even greater importance after the enactment of the Sarbanes-Oxley Act (SOx) by the United States Congress in 2002. The objective was to protect investors from fraud and errors in accounting deeds.

Before that, if during an audit an error was detected in the review of financial statements, the controller himself made manual adjustments to correct it. He had no obligation to even report the error.

After SOx, when the auditor finds some disparity, it is up to the company to disclose the failure in its controls. When it is not possible to prove that it found the error itself, it should be classified as a physical distortion, and then disclosed.

What are the risks of not performing the bank reconciliation?

In the routine of a company, numerous payments and receipts are made. There are also internal financial transactions, such as deposits. Each one of these transactions is made possible with various forms of payment, such as boletos, credit card receipts, checks, etc..

In retail, if a store works with credit and debit cards and with payment in cash, part of the receipts is made at the cashier, in cash, and part falls into the company’s bank account.

Without a manager to check these transactions on a regular basis, many mistakes may go unnoticed. In general, it may be that inconsistent data is caused by interest and fines arising from delays with suppliers, deposits with amounts lower than those recorded in the system and checks that were not cashed.

How to do bank reconciliation?

Bank reconciliation can be done using traditional methods, such as spreadsheets. But, today, it is already facilitated with the advent of software and solutions in the cloud. To improve the management of your finances, a business management system can be of great help!

See how to do the bank reconciliation in your company with our tips below.

Make a daily launch of financial transactions
The internal control provides a higher degree of reliability in the financial information passed on by your company, ensuring that it complies with the laws and achieves efficiency for the management of its resources.

Thanks to this control, the company conducts its business in an orderly manner, saves resources, detects fraud and keeps accounting data and financial information (such as the balance sheet and the DRE, for example) with integrity. It is the criterion of comparison that you will have in relation to what is reported in your bank account. Take care of it rigorously!

Make a daily record of all entries and exits in your bank account, which should include interest and fees.

This culture of accountability is what supports future control and evaluation. In addition, it also supports managers in making decisions by providing important data on the company’s progress through the market. Due to the seriousness of this operation, delegate data collection to a specific professional.

Set a periodicity

In general, the experts recommend that bank reconciliation be done on a monthly basis. Create due dates for reconciliations and prioritize high-risk accounts, reconciling them before the close of the cycle. This way, you identify problems in a timely manner.

Analyze the accounts involved

Examine the balance of the internal control and compare it with the statement of the accounts contemplated for the analyzed period. Verify that all transaction amounts match, and if there is any distortion, signal where. Observe, still, the dates of releases, ensuring that everything is paid on time and with the right values.

Search the origin of the problem and update the information of your internal control.

Correct inconsistencies

After analyzing the opening and closing balances of the internal control, as well as the balances of the bank statement and the notified dates, you must make the necessary corrections.

Any discrepancies between the data found by internal control and that contained in the account must be corrected. Store all documents that can prove the transactions examined.

Save documents

Store receipts, invoices, and other documents relevant to your transactions. Reconciliation is checked by accounting, which is responsible for checking that business data agrees.

If there are problems in receiving the money, these documents act as vouchers. A banknote issuing software can provide support in this task!

Review the conciliation

As well as corporate budgeting and strategic planning, bank reconciliation also requires revision. Make sure it is reflecting your company’s position and that the processes have taken place efficiently.

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