“Clean Books, Clear Decision” Bank reconciliation is one of the critical processes in maintaining financial accuracy in the business. Simple errors such as duplicate entries, unmatched payments, unrecorded information, etc, can hamper your financial statements and lead to tax complications.
In this article, we have broken down a few errors that most businesses make in reconciliation and how you can fix them by following a few simple steps.
Table of Contents
Duplicate Transaction
Duplicate transactions occur when the same payment is recorded more than once, leading to an increase in expenses and revenue. It could be due to manual entry errors or repeated bulk uploads. Sometimes, the vendor sends a revised invoice, and the team records it twice. Lack of communication and approval from the team members leads to duplicate entries.
Solution
● Businesses should use accounting software to detect duplicate entries.
● Reconcile accounts regularly
● Use a proper format and version control for the invoice
● Set up approval workflow
● It’s better if you use a free invoice generator to avoid manual entry mistakes
● Restrict data entry access to the authorised team only
Unmatched Transactions
Unmatched transactions refer to the entries that do not have a corresponding entry in the bank statement or vice versa. This could be where a customer paid directly to the bank account, and the accountant has not recorded it. An invoice was recorded as payment received, but the bank statement doesn’t show the payment. Banks charge interest, and SMS charges often fail to appear in the accounting records. Therefore, missed entries, incorrect amounts, and wrong dates are a few major causes of unmatched transactions.
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Solution
● Compare bank statements and ledger entries periodically
● Ensure a regular cross-check of transactions against invoices or receipts
● Use of automated reconciliation tools
● Communicate with vendors or customers when the amount differs
Uncleared Checks
Uncleared checks refer to the money that has been recorded but has not been processed by the bank, resulting in mismatches during reconciliation. For eg, if a business has issued a cheque for payment but the other person has not deposited it in the bank, or A customer has given a cheque and it’s been recorded as an income by the accountant, the bank has still not processed it. This may result in overstated income and expenses if not traced properly.
Solution
● Use a digital payment method to reduce dependence on cheques
● Record unclear cheques separately for transparency
● Ensure to check details on the cheque to avoid errors that cause delays
● Verify the cheque status with the bank
Bank Statement Mismatch
A bank statement mismatch refers to a transaction where the bank’s opening and closing balances do not match the accounting software. This means the books and bank statement show different figures, creating a discrepancy. This could be due to many reasons, for instance, A customer has made the payment, but the accounts team has not recorded it. Some entries are missing in the accounting system, eg bank charges or interests that have not been recorded in the accounts books.
Solution
● Record missing entries from the ledger (i.e use any bank statement converter online for error-free entries)
● Remove or adjust duplicate entries
● Reconcile accounts regularly
● Account for all the transactions, including bank fees, interest, etc
Inaccurate Transaction Recording
One of the major reasons for accounting discrepancies is inaccurate recording. Sometimes, payment, receipts, fees, et, are either added wrongly or not added at all. Small inconsistencies, such as vendor name, date, amount, incorrect TAS, and discount value, can cause major mismatches between bank and account books. Over the period, these discrepancies pile up and lead to incorrect financial reporting, loss and potential overpayments or missed receipts.
Solution
● Standardised data entry rules
● Use an automated accounting tool to eliminate manual typing
● Use validation checks
● Set up a regular review cycle
Conclusion
Most reconciliation issues, such as duplicate entries, missed transactions, incorrect recording, cheque delays, etc, can be prevented. Using the right accounting tool, proper and consistent workflows, and monitoring the transactions can eliminate the challenges. Avoiding these common errors can strengthen the financial accuracy and improve cash flow visibility. This will lead to better financial health and informed decision-making within the business.
