Bank Reconciliation: Check Out The Advantages and How to Do It!

Bank reconciliation is an important financial control tool for your company, whether for taking care of cargo transportation , or for professionals in agribusiness or other sectors.

Its use is essential to identify issues that could cause serious damage to your business and even fraud.

Do you know how to adopt this practice in your company? We will provide the main information below. Take advantage and ask your questions!

What is Bank Reconciliation?

Bank reconciliation refers to the ability to compare the inflow and outflow of funds from your business, which are recorded in a given period. It is performed by comparing the bank statements of your business accounts with the internal control of the accounting or financial sector.

This is because the internal sector must monitor both receipts and payments of amounts on a daily basis, and verify that everything is correct in relation to transactions carried out at the banking institution.

It may seem like a simple process, but it is very important. For example, it is through this process that you can identify an error that occurred in the bank when computing a debit that was not authorized by your company — and then contact them to resolve the error.

Likewise, your company may have recorded the payment of an account — for example, the settlement of the rental amount for the space where the warehouse is located — that was not actually made.

This may occur due to human error or due to software that has not registered with the banking institution, due to a failure in process integration.

By comparing internal data with bank statements, you can quickly identify this error. This means you can settle the payment before it causes problems for your business — such as high interest rates on the debt.

This also applies to checking amounts related to credit sales. For example, did the receivables actually arrive on the estimated date? If not, how should the company proceed with regard to the delay? These questions are essential for good financial planning.

What are Its Advantages?

Adopting bank reconciliation is essential to provide the necessary progress for the success of your business. Check out the main advantages of adopting it below.

Receivables Control

When your company works with credit, it is common to need to control receivables. This is because the registration of the amount received from sales is done internally. However, there is a wait for the money to be deposited into your account, which is the time it takes for the credit companies to clear it.

The bank conference, therefore, allows for better control of these issues, in addition to planning so as not to harm your business’ cash flow.

This can also be a way of identifying whether there is a need, for example, to rely on the anticipation of receivables as a strategy for better financial management of your company.

Improved Financial Planning

Bank reconciliation is used as an important mechanism for effectively controlling financial transactions. This makes it possible to identify how the business is doing.

By analyzing these issues, it is possible to identify whether the company is acting positively or if there are flaws that could lead to losses, optimizing the financial organization .

This will be essential, for example, to demonstrate solidity in attracting financial resources for your transport company.

Internal Fraud Identification

Bank checking allows for a comparison between internal and institutional data. Therefore, if there is a problem, it is possible to analyze whether there is fraud committed by contracted professionals or by clients acting in bad faith.

For example, a common practice in the market is Pix fraud: the person sends proof of the transfer schedule and the payment is confirmed. Then, the person cancels the transfer and the company loses out.

Other types of problems include credit card fraud and the use of bad checks — or checks that have not cleared the company’s account.

What is the Difference Between Bank Reconciliation and Cash Flow?

Some managers may have difficulty understanding the difference between bank reconciliation and cash flow, as if they were similar. In fact, there are differences between these controls.

Cash flow refers to the formal record of incoming and outgoing finances . It should be done daily to identify financial flows and trends over a given period.

Cash flow is an internal control, that is, it has no relation to external data — such as those from banking institutions — and is only monitored by the records that professionals make.

These records are used to compare the company’s internal information with bank statements, and are part of bank reconciliation.