Reconcile your bank account: Small businesses and startups
Bank reconciliation is the process of checking if the cash in your bank account matches what’s in your business books.
As a startup company or a small business owner, you are constantly making payments and receiving payments via your business and personal bank account. Before starting your business, you received advice on the importance of carrying accounting and book-keeping and now record every single transaction into your business register or accounting software. You then notice a problem when you get your bank statement at the end of the month and discover there is a difference between your business records and your bank statement. Now where do you start from? Poring through hundreds of invoices, purchase orders, bank transactions?
First, why do you need to carry out bank reconciliation as a business owner.
Bank reconciliation ensures:
- Accuracy in financial records.
- Taxes, charges and revenue are separated for every transaction.
- You do not pay multiple taxes and authorized bank deductions especially in Nigeria.
- It’s required for audit.
How do you do this?
Get your cash books and bank or financial account statement.
Your cash book is the record of your business transactions this is usually what you use to generate invoices and record expenses while your bank statement or financial account is a statement of the means through which customers pay you. A financial account could be an online payment gateway account, mobile money account, mCash, POS account, PayPal account etc.
Mark transactions that appear in your cash book and bank statements. See which items appear in your financial account and cash book and tick off.
Update cash books with unmarked items.
You need to update your cash book with unmarked transactions. For example,
- Expense of NGN240,000 appears in your cash book
- Income of NGN205,000 in your cashbook.
You would need to add NGN240,000 to your bank balance and deduct NGN205,000 from your bank balance.
The general rule of thumb is to add uncleared expenses and deduct incomes to your bank balance to generate a reconciliation report.
Lets take this a step further and learn how to do this using Accounteer a cloud based accounting software.
The most important thing is ensure your accounting solution is cloud based.
To carry out bank reconciliation using Accounteer:
Update business books
Ensure all income and expenses are up to date.
Connect your Bank Account
Connect your bank account. Accounteer integrates with Nigerian banks and does the heavy work of lifting your bank statement. You should ensure you connect all bank accounts used by your business, as there is the popular culture of using both business and personal accounts in Nigeria.
Reconcile
Once your account is connected, reconciling becomes super easy. Accounteer automatically matches your transactions to bank statements and categorizes into income, expenses and charges. You just click and reconcile.
Reconciliation Statement
Outstanding items form your reconciliation statement which could either result from bank charges, time difference, uncleared transactions or business books errors.
And this is how you a bank reconciliation for your business. If you have further questions you may schedule a free session with a book-keeping expert from Accounteer here
Interested in a free 30-day trial of Accounteer? Sign up here
P.S.: Accounteer is a cloud accounting platform that enables entrepreneurs create invoices, monitor expenses, manage inventory and assets and get beautiful accounting reports in a simple manner.
