Bank reconciliation is an essential part of the bookkeeping process for any business. It’s also time consuming, demands complete concentration to avoid mistakes, and honestly? It’s really dull.
Fortunately, times have changed. Out-of-date bank reconciliation checks can be replaced by a more efficient, automated process. In this article we explain why bank reconciliation was important, and what we’ve done to make it better whilst helping businesses avoid mistakes.
What is bank reconciliation?
Bank reconciliation is the process of comparing bookkeeping records with bank transactions in order to make sure that they match.
Why do I need to reconcile my bookkeeping and bank accounts?
It’s vital to ensure that your records are accurate, up-to-date and complete. Reconciling your bank accounts is an important step in that process.
Comparing your accounting records with the banking records helps to identify any discrepancies. Previously overlooked transactions can be picked up this way, as well as instances of fraudulent activities.
But reconciling your bank accounts and bookkeeping isn’t just useful for the day-to-day running of your business.
The information that you enter on any tax return for your business comes from your bookkeeping records. If those records are missing transactions or have errors, then the amount you report to HMRC might be wrong as well. Horrors.
But what’s the best way to manage the bank reconciliation process?
Traditional bank reconciliation
Traditionally, reconciling two sets of data against each other is a horribly time-consuming process of line-by-line manual checking, which can quickly get confusing if you have multiple transactions for the same amount.
The other trouble with humans doing work like this is that we’re… well we’re human. Our minds wander, the phone rings, we need a cup of tea.
If there are hundreds of transactions to get through, then there’s a fair chance of being distracted and missing something. You might think you’ve checked everything, but there could still be discrepancies in the data, and therefore errors in the bookkeeping. Fortunately there are better solutions available.
Bank reconciliation done differently
Accounting software providers have been able to develop bank feeds which connect your bookkeeping to your bank accounts. Once connected, information about each transaction automatically flows into your bookkeeping software, in real-time.
Though the information is coming directly from the bank, there are still some bookkeeping software providers that continue to ask users to reconcile the imported transactions. This means that:
- Their bank connection imports the transaction information for you;
- And then the software asks you to match the imported information against the records that the import creates in your bookkeeping. It’s unnecessarily complicated.
We knew that it was safe to remove that extra unnecessary step in Pandle. To us, it just didn’t make sense to spend additional time comparing each transaction with the bank, when you’re importing your bank statements anyway!
It means that our users can go straight on to the confirmation process, categorising transactions as sales, expenses, customer receipts or supplier payments. That way, you’re spending less time on the process, and reducing the potential for errors in your bookkeeping.
What if bank feeds aren’t supported for my bank?
If your particular bank isn’t supported for bank feeds (and you can check if Pandle supports your bank here), all is not lost.
You can also use a bank import to transfer transactions to your records in bulk. In our case this just means downloading a CSV file from your bank, then uploading it into Pandle.
Automate the way you confirm transactions
Assigning and categorising transactions is another essential aspect of bookkeeping. It helps us keep track of who’s paid, who needs to, and how the business is performing financially. It’s also key to making sure the correct amount of VAT or other taxes gets paid to HMRC.
But yes, confirming transactions can be another time-drain, important thought it is. Thankfully the tech replacing manual bank reconciliation also helps businesses ease some of their administrative burden by automating the confirmation process, too.
In Pandle we call them Bank Rules. Users can enable Pandle to automatically categorise transactions and assign tax codes, so that they don’t have to spend time performing checks.
Another win for time-saving efficiency means more time to focus on other things. Phew.
To try out our Bank Feeds and other time-saving features, take Pandle Pro out for a spin. Don’t worry, we won’t ask for your bank details, and the trial period is completely free.