Why prepare a bank reconciliation statement

Bank reconciliation is an internal process that companies carry out in order to ensure that their personal financial records are in accordance with the statements issued to them. Through preparing a bank reconciliation statement, companies are able to rule out errors thus resulting in a mutual reconciliation of funds between the bank and the business.

Importance of bank reconciliation statements

In the event that a company wishes to determine the amount of funds they have at any given point, they are required to prepare a bank reconciliation statement. The statement prepared shows the money spent, money paid and the transactions that are pending; thus demonstrating the financial standing of a company.

Bank reconciliation provides an opportunity to company accountants to monitor the internal cash flow of the organization they work in, whether it is a small business or a large multinational firm. For large companies, there is a team of accountants that prepare the reconciliation statement and then another team that checks the statement for accuracy thus reducing risk of internal errors.

In addition to the above mentioned benefits of preparing a bank reconciliation statement, they assist large multinational corporations to monitor their bank accounts across the globe and determine the reasons for inconsistent cash flow due to bank wires. The reconciliation statement enables the companies to monitor the wire transfers from their main account, often referred to as the parent account, into other accounts around the world.

Therefore all individuals and companies are advised to carry out reconciliations routinely, whether it is monthly, quarterly or annually. They demonstrate the company’s financial standing and negate any risk of internal or bank error.