Account reconciliation is the process of checking two records and ensuring there is no discrepancy in calculations and final statements. This is one of the most advanced eras in the history of mankind; therefore, its practices and operations are also advanced. Now, business organizations keep the bare minimum cash with them, and all the financial dealings are handled through bank transfers.
In such a scenario, ensuring proper reconciliation of business and bank accounts is more than critical. A little mistake in either can affect the record of months and lead to a huge loss. Therefore, you need to pay close attention to account reconciliation to avoid mistakes. Moreover, having an insight into common account reconciliation errors can help you avoid them.
Keep scrolling down this article to get your hands on account reconciliation errors business organizations should watch out for.
Top 7 Account Reconciliation Errors You Should Essentially Avoid
Account reconciliation is one of the basic accounting practices that every business organization has to cater to in order to ensure smooth operationality. It is often considered as simple as checking the entry of a record in the internal and external statements; however, you can overlook little mistakes that can emerge as bigger issues later on. So, make sure to watch out for the errors.
Here are some of the major account reconciliation errors you should essentially avoid to minimize your loss and increase profitability.
1. Double Handling
Double handling is the biggest and most costly account reconciliation error that you should essentially avoid. Double handling means making receipts of transactions from the business statements and paying to any party twice. This is a mistake committed by amateur accountants that cause huge loss. This is the major reason most organizations hire the service of the best accounting firms in Dubai and let the expert take charge to ensure they will not have to suffer loss.
2. Adding Entries in the Wrong Month
The next common account reconciliation error you need to watch out for is adding entries in the wrong month. It means adding debits of one month into the bank account statement of the next month. To amateur accountants, it may seem like a practice that does not cause any harm; however, the professionals know that it can manipulate the record and create issues in taxation-related matters.
3. Processing Withdrawals without Recording
Another significant account reconciliation error that you need to avoid at all costs is processing the withdrawals without recording. At times, the accountants, process withdrawals from bank accounts without making an entry into software or ledgers, which can be considered an attempt at fraud. Make sure to record all the withdrawals on time so that no one can raise any suspicions.
4. Poor Handling of Unknown Funds
The next account reconciliation error that business organizations need to watch out for is the poor handling of unknown funds. Dealing with unknown funds is a routine practice for many organizations. However, if their accountants lack the basic knowledge and expertise of treating such funds, it can lead to problems like double entries, double payments, and lack of proper record, to name a few, which are enough to invite an audit.
5. Double Payment Management Fee
One of the most critical accounts reconciliation mistakes that business organizations need to watch out for is the double payment management fee. It means paying a fee for some management tasks twice on the same day. It is often considered quite an ignorant mistake that can add up the losses of an organization, so you should only entrust your accounts to an experienced professional to not fall victim to such silly mistakes.
6. Poor Check Handling
Another critical account reconciliation error that business organizations need to watch out for to ensure the smooth operationality of their operations is poor check handling. When the organizations issue a check from the official account checkbook to clear the payment, it should be recorded in the specific ledger too. However, at times, the authority who has the responsibility does not handle it efficiently, leading to poor records and suspicions of fraud.
7. Poor Ledgers Management
The last and crucial account reconciliation error that you should essentially avoid is poor ledgers management. At times, the organizations follow the practice of entering unidentified funds into unidentified ledgers, and when they are able to track the funds, add that to a specific ledger. The result is the record of the same fund at two different places, which leads to confusion in the long run. If you have been victim to such practices, it is now time to consult the best accounting firms in Dubai and hand over accounts to experts, only to minimize loss and maximize profitability.
Seek expert consultation for advanced guidance!
If you are not making these mistakes, but your account reconciliation process is not efficient, it is time to consult expert guidance. Get in touch with professionals now and utilize their skills and expertise to ensure smooth and proper management of your business accounts.
Learn more about Finance Industry
