Reconciling the bank account to the general ledger is critical because it is one of the few areas that provides independent confirmation of transactions. Companies are reviewing internal records, the GL, to external records from the bank. This is a critical exercise and a key control point. I’ve personally seen more than one significant mess resulting from missing bank recs.
Most companies reconcile monthly. The monthly reconciliation is tedious and time-consuming, usually coming during the pressured-filled month-end period. Monthly is also a little slow in today’s environment. If a bank rec is missed, it’s another month before it’s complete. Inconsistency around bank recs is a key harbinger of other problems in the organization.
I’m a strong proponent of daily bank account reconciliation. The time required is generally very short. Missing a day, because someone is out, is easily caught up. Errors and problems are identified quickly, not a month later, and month end bank rec becomes simply reconciling the last day of the month.
Daily bank recs support the idea of a lot of little corrections to make sure that things are on the right path. There are details of how to do this at DynamicsAccounting.net with options for automated, manual, and third-party options. The key as a controller is making the decision to implement daily bank reconciliations and following through to ensure that it’s happening.
Links to all the posts in this series can be found at https://dynamicaccounting.net/gp-controller-series-index/