Why are monthly Bank Reconciliations important?
It is amazing how many groups do not prepare monthly, bi-monthly or quarterly bank
reconciliations. Remember, when you received the vote as the treasurer of your organization, you
took over the fiduciary duty to secure the organizations financial assets. By not preparing
monthly bank reconciliations, you are not doing your duty.
When you are reporting the financial position at the monthly board meetings, you are not
presenting an accurate picture of the financial position. You may say: “It is only the bank
charges, which were not recorded, so this is immaterial”, but is it?
The information on your bank statements is typed in by human beings, and human beings make
mistakes. You may have some charges on your statements, which do not belong to you. The
longer you wait to report this to your bank, the more difficult it is to trace, where they belong.
You, yourself may have forgotten to include a cheque or two in your general ledger, or if you
trace your bank balance by the cheque stubs, you may have forgotten to carry forward the
balance, made a calculation mistake or forgot to include the cheque balance on the cheque stub.
This means, that you keep writing cheques thinking, that you still have money in the account,
whereas in reality, your account is overdrawn. This will cost your community overdrawn
charges. So when updating your bank per bank statement in the general ledger, also check the
balance you carry forward on the cheque stubs and update them to balance the general ledger
after it has been reconciled with the bank statement.
There may be a matured investment in your bank account, which you had forgotten. Every day it
is deposited in your bank account instead of being re-invested, your community is losing money
by not earning the higher interest.
Do not leave instructions for automatic renewal of the investments at maturity. Meet or call your
investment representative at the bank and negotiate the best rate possible.
There also can be returned deposits e.g. the cheques you received from your customers, were not
honored by the bank. This again means that you have less money than you thought.
It can happen that a deposit you made at your bank does not show on the bank statement. You
will have to contact your bank, that they can put a trace on it.
Record all changes from the bank to your general ledger on a monthly basis e.g. bank charges,
interest income, returned cheques, matured investments, purchases of investments etc. After you
reconciled the bank statements with the general ledger at the end of the previous month, it will
make it easier to reconcile at the end of the following month, you only have to look for the
mistake in the current month.
If you are the treasurer and have someone else doing the bookkeeping and this bookkeeper does
the bank reconciliations for you, review the bank reconciliations and initial them on a monthly
basis. At least this way you have assurance, that your bank balances are correct.
The members of the organization trusted the board with the organization’s assets. The board
gave the duty to look after the financial assets to the treasurer, so do the best you can to handle
the finances in the most efficient and effective manner.
By: Heidi Brauer, C.M.A.