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. You enter all your transactions in Sage (or your other bookkeeping software or 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 presented 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 and Sage Instant 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 to actually 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 are able to 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 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.