Why Bank Reconciliation Are Important

Helping companies maintain good operating practices, bank reconciliations are normally completed once per month so that mistakes and other problems are caught and fixed early. When performing bank reconciliations, managers compare their cash records, also known as the book balance, to the financial records saved by the bank, which is called the bank balance.

Some differences between the two balances are common since transactions may not appear in bank records as quickly as companies report them in a book balance. However, any discrepancies should be easily explainable even if they are minor. Differences that cannot be explained mean something was either incorrectly reported or fraudulently transacted.

Regular bank reconciliations help companies spot problems before they get out of hand. Reconciliations are also important in the event of an audit. When auditors look through a company’s financial records, they often examine the bank reconciliations for signs of fraud or other financial issues.

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