Why We Always Start With a Bank Reconciliation at Porada Advisory

Not long ago, I was working with a passionate small business owner running a thriving printing business who, (like many of us) was juggling all of the balls, promotion, negotiating with suppliers, leading a team, just to name a few. But when we checked in on her financial records? Let’s just say, they were not her top priority.

When we first sat down, I asked a simple question ‘when was the last time your bank account was fully reconciled?’

There was a brief silence before the response came, ‘I’m not really sure’. Let me assure you, this is quite common. 

I say it’s not uncommon, as I find myself in this very similar situation often (there is no common thread among them, as it’s not one single business structure type, or from a common industry), the common denominator is that this particular function isn’t prioritised. 

Can I fill you in on a secret though? Bank reconciliations are the foundation blocks for financial clarity. Without completing a bank reconciliation regularly, you risk missing deductions and/or GST credits, risk decisions made on unreliable or incomplete data, and leave yourself open to the possibility of fraudulent activity.

Let’s pause the story for a moment, and delve deeper into some of the benefits of completing regular bank reconciliations:

• Error detection: regular review allows for easy identification of errors like duplicate transactions, incorrect entries or missing transactions

• Accurate reporting & improved decision making: by verifying all transactions are accounted for, we’re one step closer to ensuring the accuracy of the reports we rely on to make crucial strategic decisions

• Early fraud detection: regular and timely review can help detect fraudulent transactions such as unauthorised payments early on and be a deterrent for any misappropriation

• Accurate cash balance: verifying your actual cash position, allows you to manage cash flow more effectively, as you have a clear starting point, this can greatly assist with understanding where you may need to optimise payment terms with suppliers, and being on top of financing costs

So we got to work. We cleaned up historical data, matched every transaction, and reconciled accounts line by line. It wasn’t glamorous, but it was powerful.

Suddenly, patterns emerged. Duplicate subscriptions, missed payments, cash that hadn’t been accounted for properly, all fixed. By reconciling the bank accounts, we had real numbers to rely on! From here, things started to change. It was possible to trust the profit margin, cashflow details emerged, it was possible to identify overspending and we could finally make decisions based on accurate data in real time! 

Wouldn’t it feel good, knowing your numbers are accurate?

When you work with Porada Advisory, the bank reconciliation is one of the first things we tackle, because that is where the real visibility begins. I find that once we work through the process, start to reveal the benefits, something clicks, the clients I work with incrementally change their behaviour. It may be the dopamine hit that comes with the satisfaction of reconciling transactions, but these reconciliation begin to occur more often. No more ignoring the need, or leaving it until tax time, but rather building it into the workflow, because the risk of basing one's decisions on inaccurate data is just too high. 

Let’s stop guessing, and start working with clarity, and with numbers that work for you! 

Do you have any questions? Need assistance with your reconciliation?

Let's make a time to chat!