How This New Accounting Feature Can Save Businesses From Fraud and Financial Mishaps
The opinions expressed by entrepreneurs contributors are their own.
Imagine this. John Carter begins his job as the country club's new finance and administration manager by reconciling his payroll journal entries with employee payroll records provided by his payroll processor. It takes him weeks and distracts him from other important matters. Eventually, Carter deduces that the club's HR manager is misappropriating thousands of dollars in overpayments to herself and other employees.
Without reconciliation, Carter might not have discovered the fraud. It might have detected it earlier – perhaps even prevented it – if the club had implemented a policy of monthly or bi-weekly reconciliation ensuring strict control of its accounts.
Reconciliation provides reliable cash control by validating accounting data with an independent financial record, such as a bank statement, to reduce errors, duplicates, and inaccurate information.
Does your accounting data show more cash than is available in your bank account? Maybe a customer's payment was rejected or you forgot to account for bank charges. Reconciliation strengthens the integrity of your accounting, helps monitor cash flow, identifies fraud, prevents overspending, and creates accurate financial statements.
Related: Six Tech Trends Every Bank Should Be Ready For in 2021
Small and medium-sized businesses have very limited resources, usually with an overworked accountant manually reconciling financial records. Depending on factors such as a small business's buy and sell values, number of employees, operational history, etc., reconciliation can be time-consuming, laborious, and error-prone. Consider the steps involved:
Connection to the banking portal. Download bank statements. Manually compare each entry to its counterpart in the accounting records. Document the process on multiple spreadsheets.A misstep at any step, with any input, can jeopardize the entire process.
Also, most payment methods take time to set up. Here's a breakdown:
Related: How to Protect Your Small Business From Fraud
ACH Credit (Automated Clearing House) Around. 1 working day ACH Debit Around. 1-2 business days Same Day ACH Credit 1 business day Same Day ACH Debit 1 working day Bank transfer Snap Real-Time Payments (RTP) Snap Checks 3-7 daysSome of these settlement times cause a lag that obscures the available balance, transactions being processed, and when different sets of transactions are likely to settle. Small businesses typically operate on low margins, and making financial decisions on outdated or incorrect information can be extremely costly.
Banks also process transactions in batches. A small business may make ten separate $1,000 ACH credit transactions, but the bank treats it as one $10,000 transaction, making it difficult to link each payment to the correct transaction on the bank statement.
>Related: How to Write a Check Properly in 5 Easy Steps
Automatic reconciliation solves these problems by uploading and validating bank statements with their accounting platforms. It offers accurate financial statements, speeds up accounting and improves financial management. Small businesses are under increasing pressure to
The opinions expressed by entrepreneurs contributors are their own.
Imagine this. John Carter begins his job as the country club's new finance and administration manager by reconciling his payroll journal entries with employee payroll records provided by his payroll processor. It takes him weeks and distracts him from other important matters. Eventually, Carter deduces that the club's HR manager is misappropriating thousands of dollars in overpayments to herself and other employees.
Without reconciliation, Carter might not have discovered the fraud. It might have detected it earlier – perhaps even prevented it – if the club had implemented a policy of monthly or bi-weekly reconciliation ensuring strict control of its accounts.
Reconciliation provides reliable cash control by validating accounting data with an independent financial record, such as a bank statement, to reduce errors, duplicates, and inaccurate information.
Does your accounting data show more cash than is available in your bank account? Maybe a customer's payment was rejected or you forgot to account for bank charges. Reconciliation strengthens the integrity of your accounting, helps monitor cash flow, identifies fraud, prevents overspending, and creates accurate financial statements.
Related: Six Tech Trends Every Bank Should Be Ready For in 2021
Small and medium-sized businesses have very limited resources, usually with an overworked accountant manually reconciling financial records. Depending on factors such as a small business's buy and sell values, number of employees, operational history, etc., reconciliation can be time-consuming, laborious, and error-prone. Consider the steps involved:
Connection to the banking portal. Download bank statements. Manually compare each entry to its counterpart in the accounting records. Document the process on multiple spreadsheets.A misstep at any step, with any input, can jeopardize the entire process.
Also, most payment methods take time to set up. Here's a breakdown:
Related: How to Protect Your Small Business From Fraud
ACH Credit (Automated Clearing House) Around. 1 working day ACH Debit Around. 1-2 business days Same Day ACH Credit 1 business day Same Day ACH Debit 1 working day Bank transfer Snap Real-Time Payments (RTP) Snap Checks 3-7 daysSome of these settlement times cause a lag that obscures the available balance, transactions being processed, and when different sets of transactions are likely to settle. Small businesses typically operate on low margins, and making financial decisions on outdated or incorrect information can be extremely costly.
Banks also process transactions in batches. A small business may make ten separate $1,000 ACH credit transactions, but the bank treats it as one $10,000 transaction, making it difficult to link each payment to the correct transaction on the bank statement.
>Related: How to Write a Check Properly in 5 Easy Steps
Automatic reconciliation solves these problems by uploading and validating bank statements with their accounting platforms. It offers accurate financial statements, speeds up accounting and improves financial management. Small businesses are under increasing pressure to
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