BALANCE POINT
What is the Primary Purpose of a Bank Reconciliation?
I can only imagine how tired our clients get of us talking about reconciling this or needing to reconcile that. The word ‘Reconciliation’ is just as commonly used by the ASAP team as the word guest is by your team. With modern day technology, we’re all able to look at our bank accounts from almost anywhere at any time and monitor all the ins and outs daily. So, what is the big deal?
Why is Bank Reconciliation Important?
Let’s state the obvious first: the government is pretty unhappy when accounts are not reconciled. Especially if we’re talking about states that require 3-way reconciliations of trust accounts (which we are seeing more and more of), and if they are performing an audit. CPAs will always ask for bank statements and reconciliation reports to confirm the reconciliation in your accounting platform align with the bank/credit card statements as they should.
The not so obvious reasons that we stress the importance of reconciliations is because we have witnessed countless instances where transactions should be clearing the bank, but aren’t (which is very alarming when there should be deposits from OTAs or merchant processors that aren’t coming in) as well as instances where things are clearing the bank that were not appropriately realized in the accounting software. When bank accounts are reconciled regularly, it’s very easy to identify issues and correct them sooner rather than later.
How Long Should My Transactions Take to Clear?
In general, we expect to see deposits clear the bank within 2 days of being posted. ACH payments should clear within 2-3 days of being posted and expenses, such as checks should clear within 90 days of being posted. When that doesn’t happen, we should all be asking the question “Why?” If you don’t know if that has happened or not because accounts aren’t being reconciled regularly, then we’re challenging you with, “Why not?”
