How Does Bank Reconciliation Work?

How Does Bank Reconciliation Work?

By Unemployment Tracker Posted February 13, 2019

Bank reconciliation is one of the most important ways to monitor your finances and make sure your internal and external records match. It's a process that can be done daily, weekly, monthly or another period of time that works for your business.

How Is Bank Reconciliation Completed?

For those who've ever balanced a checkbook, the process is essentially the same. You compare your company records to a statement received from the bank. You go through and verify the income and expenditures match and the ending balance is the same.

In some situations, outstanding checks – checks that haven't been cashed – may not be reflected on your statement causing different totals. Usually this is easy to spot and can be noted on the reconciliation form you complete. Minor differences due to timing are easily explainable and typically not problematic.

Why is it important?

Failing to make sure your records match with the bank's information can lead to serious problems down the line. If something is amiss and you aren't taking the time to make sure everything matches, one small error can snowball.

Beyond human error, failing to do a regular bank reconciliation leaves room for criminal activity. When you aren't checking your balances and transactions, you can't be sure what is and isn't happening without your knowledge.

Even more, business accounts aren't protected under federal law like personal accounts. This means if something goes wrong in your account, you can't assume the bank will fix anything you've missed.

How Does It Affect Unemployment Insurance?

Similarly to everything else, you want to make sure all your numbers match up, including the amount of UI tax you're paying and the total amount being paid to claimants. By monitoring this, you can make sure everything is aligned and watch closely for overpayments.

Get Control of Your Unemployment Insurance Costs

At Unemployment Tracker, we have a full range of solutions, from preparation and documentation software to allow you to do it yourself to full-service consultation services. No matter your needs, we have the solution. Contact us today for a custom quote or a live demo!

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