Completing a daily online reconciliation allows you to spot errors or fraudulent activity very quickly, while also requiring minimal additional reconciliation work at month-end, thereby contributing to a faster close.
This also calls for several changes in the way you complete reconciliations. The single most important procedural alteration is the method used to check off deposits in the company's bank reconciliation software as having been received by the bank. If you were to complete a standard once-a-month reconciliation, you'd simply plow through the entire bank statement and check off received deposits in your reconciliation software all at once. However, this does not work when doing a daily reconciliation, because the bank may not have recorded all of the cash receipts that you originally posted as being received on a single date.
For example, I might receive a $10,000 ACH electronic payment on a Monday, as well as $32,500 of checks on the same day; my deposit entry is for $42,500 on Monday. The bank will record the $10,000 on Monday, but it may not record the checks for several more days. This presents a problem during my daily reconciliation, since I can only check off the entire daily receipts batch of $42,500 as having been received by the bank -- which creates a reconciliation disparity.
The solution is to record all electronic payments on a weekend, when there are no checks coming in. In the previous example, I could have entered the $10,000 ACH entry on the preceding Sunday, and recorded the $32,500 of checks in the normal manner on Monday. If other ACH payments arrive later in the week or month, I can still record them on the same Sunday, since I know that the cash has already arrived per the bank's records, and can be checked off at once in the company reconciliation software as having arrived.
The only problem with this approach is that it does not clearly identify the date on which electronic payments actually arrive. To resolve this problem, enter the actual receipt date in the cash receipts field where you would normally enter the check number: For example, the entry could be "ACH 03/14/10", which signifies an ACH payment received on March 14, 2010.
Daily Bank Reconciliations