Reconciling your accounts on a monthly basis is important to keep your business on track. With accurate and timely account reconciliation, you’ll be able to keep tabs on your financial health and make better business decisions in the future.
Three reasons to perform monthly account reconciliation:
1. To Catch and Correct Accounting Errors
No matter how good your accounting system is, there’s still the potential for human error. Letting these mistakes go undetected can be extremely costly to your business. By reconciling your accounts every month, you can spot these errors before they damage your bottom line and help prevent mistakes in the future.
2. To Follow Up on Your Transactions
It doesn’t happen very often, but sometimes checks can be lost. If clients say they haven’t received one, what do you do about it? If you’re reconciling your bank statements every month, you’ll be able to see the checks that haven’t cleared. That way, you can find these missing payments and correct them.
3. To Track and Compare Your Business Performance
If you don’t reconcile your bank statements monthly, you might not be aware of potential financial problems, such as insufficient income. Monthly account reconciliation shows you exactly where you stand. And, it lets you track your performance over time, meaning you can compare the current month's numbers to the previous month or year over year.
Even if you don't have an accountant on your staff, you should still be “closing the books” every month. With monthly insight into your cash flow, you’ll be better able to track your progress and avoid costly errors. If you don’t have time or capacity to do this in house, a professional monthly accounting service can provide you with the accurate financial tracking you need.
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Image by Dafne Cholet via Flickr, licensed under CC BY-2.0.
