Why Bank Reconciliation Is Fundamental to Accounting Companies
As all business owners are aware, an accurate bottom line on figures is the most important element in keeping accounting records. Within every business plan is a system for maintaining that line-by-line accuracy, especially in the case of a CPA firm. Within the accounting industry, bank reconciliation is a crucial aspect for all client management and trust.
Here, we will look at some of the major reasons why proper bank reconciliation is fundamental to accounting companies, and some new technological tools available to CPA representatives to make the process more manageable.
How Reconciliation Works
Understanding the necessity of proper bank reconciliation offers an understanding as to why it’s so important within the accounting business. Throughout the process, or “lifecycle,” a company’s financial records are carefully compared to those of their business bank account, along with any cash accounts that may factor into the company’s overall expenses. Outstanding checks, real estate holdings and office space, and all cash flow profits within the business account are examined.
Depending upon the size of the company, the reconciliation process can take either a relatively brief or lengthy amount of time, and this is especially true of larger corporations with numerous affiliates or divisions; new businesses or startups tend to have a shorter reconciliation process, although a good accounting firm will still take its time with all financial examinations. When preparing for the end of every fiscal quarter (but preferably on a regular basis at the end of the month) an accounting service ensures that a client’s ending balance, known as a book balance, matches the bank reconciliation statement, referred to as the bank balance. Should any minor discrepancies surface within the bank transaction process, the next step in the comparison process may be a needed adjustment to the client’s records.
Reconciliation Methods for CPA Firms
As technology evolves and more companies demand faster turnaround for reconciliation results from their retained CPA practice, as well as the highest rate of accuracy, new methods for the reconciliation process are available to accounting firms. For example, reconciliation software has quickly become an industry standard, allowing for rapid solutions for regulatory standards, market trends, and current compliance mechanisms. Bank reconciliation software vendors also license some of the best ways to integrate automation functionality for analytics analysis, regardless of the volume of transactions. This makes the software solution ideal for CPA use, no matter the size of the client’s business structure.
Not only is the bank reconciliation process crucial as an ongoing offering for every accounting business (some organizations even conduct such a comparison of their general ledger and bank transactions on a daily basis), but the addition of analytics into the reconciliation software is a necessity for assuring the legitimacy of a client’s stated account balance. For example, an analytics review can unearth discrepancies within a balance sheet or, ultimately, the bottom line. An automation-driven review can also take recent withdrawals, overdraft fees, and bank service charges into account.
Your Future in Accounting
With new tools and accounting software now available to assist in the long hours and hard work of the full bank reconciliation lifecycle (particularly the automation functionality, which not only assures accuracy for small businesses and larger organizations alike), it may also be feasible to start your own accounting firm. Taking into account that your own CPA firm may benefit from understanding the needs of prospective clients as an entrepreneur yourself, it could be a good idea to work one-on-one with those small businesses as a niche sole proprietorship.
However, whether you’re starting your own CPA firm or choosing a successful practice to handle your company’s bank account for the coming tax season, remember that the reconciliation process is one of the most important aspects of financial success and stability for a wide range of industries and their accounting services alike.