With most cheque account transactions and
credit card statements now being available anytime online, you might be tempted
to skip the monthly chore of reconciling your organisation's accounts. Even if you use cloud accounting apps and no
longer have to wait to receive a paper statement in the mail to check your
balances, there are several reasons why regularly reconciling your accounts is
still a good idea.
Eliminates errors by
serving as a double check of your data entry. Even the best accounting software can develop
a glitch and possibly miss transactions. Reconciling your accounts allows you
to catch errors and enter any missed transactions that your software might have
missed when doing the books. Other
errors that you can catch with reconciliation include entries with incorrect
amounts or entries made to incorrect accounts. If you misplaced a receipt and a
transaction didn't get entered into your records, reconciling your accounts
regularly allows you to catch this type of error as well while you still have a
chance to search for the missing receipt or perhaps return to the supplier and
ask for a duplicate.
Allows you to pick up on
overpayments or underpayments to suppliers and others. Regular account reconciliation allows you to stay on top of your
transactions. When reconciling your account it's not unusual to have some
outstanding cheques, but if one has remained uncashed for a period of time,
it's always a good idea to follow up and find out if the cheque was lost, or if
there is another issue.
Reduces potential for
losses due to fraud or oversight. Regularly reconciling your accounts ensures
that everyone that handles the accounts and issues cheques is only using the
charity's funds to pay for authorised transactions. It also helps you to quickly catch any errors
made by your group's bank or other financial institution.
Ensures financial
statements are accurate so that data used to calculate required reports or
taxes and fees is accurate. If you have missing or
incorrect transactions, then the financial statements that are prepared from
these records are incorrect as well. Any taxes or other fees that would be
based on these statements would also be incorrect. Regular reconciliation of
your accounts will catch these mistakes early in the year and allow you to take
corrective action long before required reports and forms are due.
Allows you to have a
better grasp of your performance. While some may prefer to look at a statement
or other report to get a picture of their charity's financial stability,
regularly reconciling your accounts can also give you an instant snapshot and
up close view on your income, expenses and cash flow. Staying on top of this information allows you
to help your charity, club or NFP to take corrective action should you spot a
potential shortfall in income or increase in expenses.
While taking the time to regularly
reconcile your organisation's accounts is not the most exciting or easy task
that you have as a treasurer, it certainly has several benefits for your
charity that will make it well worth the time and effort.
