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Bank Reconciliation: Is It Really Necessary?

Here are three good reasons why it is ...

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POSTED BY ALISON MEAD ON 10/06/2019 @ 8:00AM

So, you have heard people talk about the bank reconciliation, but have no idea why you should be doing it, or even what it is ...

In my opinion a bank reconciliation is something that you should do regularly!

In my opinion a bank reconciliation is something that you should do regularly!

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You enter all your transactions in Sage (or your other bookkeeping software or even, manual books) so what is the point of doing the bank reconciliation?

"First, what is a bank reconciliation?"

In basic terms, it is checking your accounts data against your bank statement. In Sage, it consists of ticking items off in the bank reconciliation screen, by moving them from the top window to the bottom window, but in a manual system, it just means checking your books against your statement.

Also, in accounting, it is performed so you are aware at the end of the month of any unpresented cheques or uncleared payments so you can match your bank balance to your book balance.

There are many good reasons, some of which apply to you, whichever package you use to 'do' your accounts, and some which are specific to the bank reconciliation in Sage 50 Accounts:

  • It is an excellent way of checking for errors – even the best bookkeepers make mistakes, or miss items like direct debits or one-off payments that just appear on the bank statement – by doing the bank reconciliation you spot omissions and duplications very easily.

  • In Sage, if you mark an account as needing a bank reconciliation, then you need actually to do it, or you will never be able to clear down the transactions in the future. Bank transactions which are not marked as reconciled are considered to be still required and the clear audit trail will not remove them.

  • If you can, it allows you to split the workload. Let one staff member enter the items, and someone else do the bank reconciliation, that way you can double-check all your entries. I have bookkeeping clients who do their own data entry, but like me to come and do their bank reconciliation and VAT returns, so they have the peace of mind that any errors will be spotted and verified before the VAT return is submitted.

Specifically in Sage, once you have completed your bank reconciliation you know any items left in the top window are the ones you need to check up on as they may have been entered incorrectly, a cheque might have been lost or a promised receipt never actually hit your account.

The bank reconciliation function in Sage is also one of the areas that has been vastly improved in the last few updates, with better reports, the ability to transfer the contents of the screen to Excel for analysis and the stamping of all transactions with a date when they are reconciled, making spotting mistakes much easier too.

If you would like a training session to get you started with doing an effective bank reconciliation for yourself, then this is one of the areas that lends itself to the remote training I do using PC remote control and a telephone call to talk you through the process.

"Would you like to know more?"

In conclusion: is a bank reconciliation really necessary? I say yes, it is! If you'd like to find out more about bank reconciliations, any other aspect of bookkeeping or software such as Sage (or even Xero) then do give me a call on 01604 420057 or click here to ping me an email and let's see how I can help you.

Until next time ...


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More about Alison Mead ...

Alison loves bookkeeping and supporting bookkeepers. She has been helping clients to be better bookkeepers in Sage 50 for over 24 years and has been Xero Accredited in accounts and payroll for a number of years too.

She specialises in a very unique hand-holding method of training, helping bookkeepers and business owners to use their accounts software as and when they need support in setting up and producing their invoices, reports and financial information.

Alison combines her role at Silicon Bullet with her Forever Living network marketing businesses and is often to be seen at business networking meetings as she likes to keep busy.

You know what they say: if you want something done well ask a busy person!


01604 420057