Bank Reconciliation – Methods, tools and practical advises

Edited Translated by Team CALIXYS | Latest Updates Published on 20 January 2022

Bank Reconciliation – Methods, tools and practical advises

Here are the answers to all the questions you may have when you are managing bank reconciliation.

What is bank reconciliation ?

Bank reconciliation is an accounting process that help you to double check the bookkeeping. You compare the transactions on your business accounts against your bank statements in order to resolve breaks and identify fraudulent transactions in time.

The bank reconciliation is a highly recommended if you want to fully control the correspondence between the bank statements and the accounting operations.

Why is a bank reconciliation necessary ?

There is no specific regulation indicate that bank reconciliation is mandatory; however, if you would like to have full vision of their transactions on accounts, regular bank reconciliation is the best choice.

By doing periodic bank reconciliation, you can monitor the cash flow at real time and detect fraud or errors of all kinds quickly to minimise the damage like data entry errors or unrecorded transactions etc.

It allows you to resolve the differences and breaks between your bank statement and your accounting balance so that you are able to carry out the necessary actions and adjustments on your book.

What is the process for performing a bank reconciliation ? 

The process of bank reconciliation can be divided into the following three steps:

 

Step 1 : Check the balances consistent by verifying the balance in your company’s accounts and the balance on the bank statement within in the same period.

Step 2 : Adjust the bank statements and accounting statements. The relationship of the transactions can be varied (one-to-one, one-to-many, many-to-many).

Step 3 : The unreconciled bank and accounting transactions must be analysed and resolved. Suppose they are still not equal at the end of the process. In that case, you will have to start the reconciliation process all over again until the bank reconciliation report is completed.

Auditors will use this reconciliation statement to perform the company’s year-end auditing.

How to do a bank reconciliation in an easy and fast way

CALIXYS supports many clients from different sectors by offering them automated bank reconciliation solutions. We will give you three methods that are commonly used by most companies, and we will also share our suggestions for each method.

METHOD 1 – Perform the bank reconciliation with EXCEL Spreadsheet

How does it work ?

The spreadsheet is always the top choice for some companies to execute a bank reconciliation. Reconciliation with spreadsheets involves entering the bank and accounting balance on the desired reconciliation date. After checking the transactions between your account statement and your bank accounts, you manually enter all the unmatched transactions. Your reconciliation will be “balanced” as soon as there is no break between the bank statement and the accounting balance. Many spreadsheets templates are available on the internet. However, according to the experience and feedback from our clients, most of the pre-established templates are not 100% suitable in many different situations. You can create your own template from scratch based on your business need. Nevertheless, it is not worth the effort if you consider the time and talent you need to develop a calculation model that will produce a reliable result.

Why should you be careful about traditional approaches with EXCEL ?

The bank reconciliation with spreadsheets seems to pose no difficulty.

Executing bank reconciliation with spreadsheets is not secure and sustainable for accounting departments. It is merely an inefficient, risky, and prone-error process. This method cannot handle a high volume of data and transactions between several banks accounts.

METHOD 2 - BANK RECONCILIATION WITH AN ACCOUNTing Firm

Another common method is outsourcing these manual tasks to a chartered accounting firm.

This solution could save your team a lot of time and assure the accuracy and reliability of your bank reconciliation.

However, it is easy yet costly. The charge of the accounting firm is considerably high. In addition, the lack of real-time monitoring can be a potential problem for some companies. You will not have complete control and flexibility throughout the whole operation.

METHOD 3 - BANK RECONCILIATION WITH DEDICATED SOFTWARE

How does it work ?

In general, you will simply need to import the accounting data and bank account statements into the dedicated solution at your own pace. Then, define and schedule your matching rules according to your business requirements. You will then get a reliable reconciliation result and overview of your accounts timely.

In some solutions you can even connect all of the data set with an API in order to reach a fully automatic data ingestion then further proceed the data match and reconciliation step.

Why should you do your bank reconciliation with a dedicated software ?

Laurent Dufour – Founder of the Blog du Dirigeant explained how a bank reconciliation tool brings us essential benefits:

 

1. A substantial time saving

2. A clear, precise and up-to-date view of cashflow

3. Facilitate the work of accountants

 

This is why we advise you to do your bank reconciliation with a dedicated software.

An automated bank reconciliation solution can simplify your day-to-day processing and give you an exact and accurate visibility of your accounts.

The XREC Reconciliation Solution of CALIXYS allows you to quickly identify and classify breaks with an innovative exception management module. Your bank reconciliation statements will be done automatically by the date you choose.

Finally, the XREC Reconciliation Solution ensures full confidence, accuracy, and timely follow-up on issues. You take control of your data, minimise the risk, improve the efficiency and the quality of your day-to-day operations with high-level transparency and governance.

> Want to know more about the bank reconciliation software comparison published by Laurent Dufour? Simply click here to access the full article on his website

What questions should you ask yourself before investing in a bank reconciliation solution ?

Once you have identified the need to automate and industrialise your reconciliation process, you have to ask yourself some constructive questions before investing in a dedicated solution.

Here come the 5 questions shared by Olivier Van de Flaes – Founder of CALIXYS:

 

Question 1 : What type of data do you need to reconcile? What type of data structure is it?

Question 2 : What is the nature of my reconciliation? What is the required frequency? Have business process  been defined?

Question 3 : What is the desired level regarding the security? Is long-term data stockage a criterion ?

Question 4 : What is the desired level regarding the automation? What is the desired capacity for interfacing with your current system?

Question 5 : Will there be other type of reconciliation in the near future ? Do you want to centralise all of reconciliations ?

Streamline your bank reconciliation with XREC Reconciliation Solution of CALIXYS

The XREC Reconciliation Solution of CALIXYS centralises and automates the reconciliation processes of financial and accounting data. As a result, you can speed up your financial closing process. The solution frees up your team from low value-added tasks and reduces risks by controlling the entire process. > Discover all the features of our solution XREC through a personalised demonstration with our experts.

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