Good bookkeeping is all about accurately recording and matching your financial transactions. Over the course of a usual week of trading, you’ll have a range of customer payments being deposited into your bank account and a host of operational expenses being withdrawn from that same account. Regularly reviewing and keeping your bank reconciliations up to date will ensure your business transactions are accurately recorded and there are no missing or duplicate transactions.
To keep on top of this, you must match each line item on your bank statement with the transactions recorded in your accounting software. This process of matching incoming (and outgoing) transactions with the relevant receipt, invoice or supplier bill is called a bank reconciliation. Not regularly reconciling your bank accounts will lead to under or over-estimating your available funds.
Why are bank reconciliations so labour intensive?
Bank reconciliations (or bank recs) are not the most thrilling part of the accounting process. But it’s essential to have an accurate overview of your current financials, particularly the balance that’s in your business bank account.
Traditionally, to complete the bank recs, you would need to:
- Obtain a copy of your bank statement for the relevant period
- Check the deposits (cash coming in) and withdrawals (cash going out) on the statement
- Look at the related credits and debits in your accounting software
- Match these transactions to the relevant receipts, invoices or supplier bills
- Reconcile (match) the statement balance in the bank with the balance showing in your accounting software as at the end of the period (week, month, quarter etc).
It’s a critical business process, and something you have to keep on top of. But it’s also a laborious and time-consuming task that eats into your business day. So, is there an alternative?
How can automation help lighten the workload?
Accounting software has evolved in leaps and bounds over the past decade. Many of the innovations that are now available focus on alleviating time-intensive tasks, like bank reconciliations.
Modern cloud accounting packages offer a range of ways to not only lighten the financial workload, but also to improve speed, accuracy and efficiency.
For example:
- Live bank feeds – these software integrations pull all the data from your online banking into the accounting software, giving you a live feed of your bank transactions. No more manual data entry!
- Automated matching – artificial intelligence (AI) and machine learning are used to automatically match the right invoices and bills with your bank transactions.
- One-click matching – in a platform like Xero, you just need to review the automated matches and then click OK to match the transaction and complete the bank rec process.
- Reduced human error – with an algorithm doing the matching, there are fewer typographical errors in the bank rec process, and the whole process can be completed in minutes, rather than hours.
- Real-time bank and accounting balances – with live bank feeds and real-time data in your accounting software, you have the most current overview of your balances.
Talk to us about automating your bank reconciliation process
If your current accounting software doesn’t allow for automated bank recs, now’s the time to find the right bookkeeping package and upgrade. Cutting out the manual processes will give you more time to focus on higher-value financial tasks, and keeps the reconciliation process ticking away silently in the background.
If you need help with choosing an online accounting package that is suitable for your small business in Australia, book an obligation free consultation with NumbleTM today. We are experts in small business accounting software options such as Xero, MYOB, JCurve, and Netsuite and can provide recommendations to the software most appropriate to you business.