How to reconcile an account

21 Mar How to reconcile an account

Stripe’s automated system handles this comparison, enabling you to capture revenue accurately and reconcile your internal accounting systems with Stripe-processed charges and refunds at a transaction level. Reconciling your bank statements simply means comparing your internal financial records against the records provided to you by your bank. This process is important because it ensures that you can identify any unusual transactions caused by fraud or accounting errors. As a business, the practice can also help you manage your cash flow and spot any inefficiencies. Accuracy and strict attention to detail are crucial to any account reconciliation process. This is important for ensuring the reliability of financial reporting in any organization and maintaining the integrity of the process and results.

As a result, the accounting industry has sought ways to automate a previously strenuous manual process. The pressure of SOX is coupled with the perennial need to mitigate erroneous reconciliation in the process. Reconciliation must be performed on a regular and continuous basis on all balance sheet accounts as a way of ensuring the integrity of financial records.

What is reconciliation in accounting?

Most importantly, reconciling your bank statements helps you catch fraud before it’s too late. It’s important to keep in mind that consumers have more protections under federal law in terms of their bank accounts than businesses. So it is especially important for businesses to detect any fraudulent or suspicious activity early on—they cannot always count on the bank to cover fraud or errors in their account. Account reconciliation is the process of cross-checking a company’s account balance with external data sources, such as bank statements. Its purpose is to ensure accuracy and consistency of financial data, which is vital for informed decision-making and maintaining financial integrity. Whether you have high transaction volumes or complex transaction scenarios, Stripe’s reconciliation solution offers scalable and reliable support for your financial operations.

What is an Account Reconciliation?

1. After finding evidence for all differences between the bank statement and the cash book, the balances in both records should be equal.
2. That’s why account reconciliation remains a key component of the financial close process.
3. Stripe’s reconciliation process involves comparing your business’s internal records, such as invoices, with external records like settlement files, payout files, and bank statements.
4. These steps can vary depending on what accounts you are reconciling, but the underlying premise is always the same – compare your ending balance against supporting documentation and make any adjustments as needed.

For small businesses, the main goal of reconciling your bank statement is to ensure that the recorded balance of your business and the recorded balance of the bank match accrual accounting concepts and examples for business up. After finding evidence for all differences between the bank statement and the cash book, the balances in both records should be equal. You should prepare a bank reconciliation statement that explains the difference between the company’s internal records and the bank account. Today, most accounting software applications will perform much of the bank reconciliation process for you, but it’s still important to regularly review your statements for errors and discrepancies that may appear.

The Reconciliation Process

Reconciliation is used by accountants to explain the difference between two financial records, such as the bank statement and cash book. Any unexplained differences between the two records may be signs of financial misappropriation or theft. In single-entry bookkeeping, every transaction is recorded just once rather than twice, as in double-entry bookkeeping, as either income or an expense.

Stripe’s reconciliation solution automates the reconciliation process for businesses and offers a comprehensive picture of your money movement. Businesses are generally advised to reconcile their accounts at least monthly, but they can do so as often as they wish. Businesses that follow a risk-based approach to reconciliation will reconcile certain accounts more frequently than others, based on their greater likelihood of error. The important thing is to establish internal processes for account reconciliation and adhere to those processes.

Regular account reconciliation should be combined with invoice reconciliation as part of your internal controls in accounts payable. While the reconciliation process remains the same, with two sets of documents compared for accuracy, the difference lies in what is being reconciled. Though you may not see the process if you’re using accounting software, because this is generally automated, if you enter a debit to an account you will have to enter a corresponding credit for the account to remain in balance. The errors should be added, subtracted, or modified on the bank statement balance to reflect the right amount. Once the errors have been identified, the bank should be notified to correct the error on their end and generate an adjusted bank statement.