Bank reconciliations...blah blah blah

Such a simple thing can mean so much

Jun

2015

We recently worked with a client from Company X who needed help building a 3-5 year plan. It was the perfect engagement. Unfortunately, the experience didn’t go as smoothly as either of us had hoped.We discovered early on that Company X’s bank reconciliations (bank recs) were not up to date. They didn’t conduct them on every one of the company’s five bank accounts, and it had been at least a year since they conducted them on some credit cards. We see this happen often — a company’s internal bookkeeping resource grew overwhelmed and fell behind, and instead of seeking counsel or insisting on help, the bank recs fell by the wayside.

Bank recs sound so innocent, but they play a critical first step in preparing your financial statements. So much of your financial picture depends on the cash flowing in and out of your business, and bank recs can help accurately record every transaction. This was not the case with Company X, and its poor financial documentation was detrimental to its business. We immediately began addressing the need for more bookkeeping and financial tracking resources. With our help, and our unique, objective perspective, we helped our client understand that it was time to hire his first true accountant to supplement a transactional bookkeeper.

Together with our client and their staff, we were able to get caught up with accurate and complete financials in order to have confidence in the numbers…and then we jumped back to build that 3-5 year plan.

What you need to think about

If you’re concerned you may be in a similar situation as Company X, ask yourself the following questions:

Are my bank recs done? We insist you review them by the 10th of every month.
What do I look for on my bank rec? Review each line item of the bank statement and review each line item of the bank rec. Note what is cleared and what is outstanding.
Who should be doing my bank rec? Internal controls best practices recommends bank recs be completed by someone distanced from the day-to-day operations of accounting.