Record to report / R2R – Reconciliations

Bank

Bank reconciliations are a mapping between the set of transactions of your bank account, as maintained by you and by your bankers.

http://faoblog.com/processes-record-report-r2r-reconciliations-bank/

This form of reconciliation is the most traditional reconciliation and most widely practiced as well. When we studied accounting in our school / college, this was probably the only form of reconciliation taught to us, and we used to get really confused what items to reduce and what items to add to the starting balance.

Now, depending on the size of the business and its spread, there would be one to many bank accounts. In the digitized world, most of the banks now send digital statements. For larger businesses, banks also agree to send data feeds and some of the ERPs do benefit from these. You have the ERPs / accounting systems configured to take these inputs and automatically map / throw out the differences. But does that ensure a 100% mapping in an automated manner? The clear answer is no. Your accountant could have passed a single entry for multiple similar transactions, which would reflect differently in the bank statement, there would be charges and interest components missing from your accounting records and a lot more. There will always be some entries which will need a manual intervention.

Next post, I will cover the basic reconciliation, as to what gets added and what gets reduced and then come back to the bank reconciliations post that.

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