| Why reconciling a bank account is so important |
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EconoAccounting's
key feature is reconciling the bank account. Many people wonder at our
fixation on this point. Simple: A reconciled bank account is the starting point of doing your accounts. If your accounting system does not fully reconcile your bank account, then it means that there are financial transactions gong through your bank account that are not recorded in your accounting system. This implies that there are either expenses or deposits that have not yet been recorded. At the same time there could be VAT implications - VAT on expenses is not being captured and your VAT report will be wrong. EconoAccounting requires you to reconcile the bank account before proceeding further. At least we then know that all bank transactions are captured correctly, no typos, no forgetting to capture one line of data. The balance sheet we produce proves that the bank account value is exactly what the bank says it is. This gives extra credibility to your accounts - allows you to know that your data is accurate. Another key reason for reconciling your bank account is to check your bank. You need to ensure that no unauthorised transactions go through your bank account. Do you remember a couple of couple of years ago there was a hacker in Cape Town? He stole someone's password and then proceeded to remove about R450 000 from the company's ABSA bank account (it was actually a law firm). He used the money to pay for computer equipment. This fraud was only picked up by the company's bookkeeper/accountant SIX weeks after it had occurred. In the end ABSA did pay back the money, but I wonder how a company could have not missed nearly half a million Rands from its bank account! It is obvious they did not reconcile their bank account, and they were not users of EconoAccounting! Had they been they would have instantly seen the transfer, and they would have had to allocate that expense to the right account. Had they allocated this expense, even if to computer purchases, and then used EconoAccounting to produce a balance sheet, surely someone would have asked about an extra R450 000 appearing in their income statement? |
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