The accurate balance on the bank account depends on the timely delivery of statements and their booking. How do you know how timely your accountant is — that is, whether they book documentation on a daily basis?
A simple timeliness test
Request the balance of the bank account and compare it with the balance from the last generated bank statement. If they are equal, you can generally be confident in the other overviews you request from the accountant as well:
- Overview of customer receivables
- Overview of unpaid liabilities
- Current cash balance
Why bank confirmations are important
Despite the above, it often happens in practice that at the end of the year, during bank confirmations, the balance matches but the turnover does not. This means that some transaction — if it was both an inflow and outflow of the same amount — may not have been recorded.
Such an omitted transaction can:
- Represent a materially significant amount
- Affect the financial result
- Affect the calculation of other taxes
That is why annual bank confirmations are important for the credibility of the bookkeeping.
Why monitor the bank account balance every day
Monitoring the bank account balance is essential — not only because of current liquidity, but also because of:
- Future plans and investments
- Expected obligations
- Credit liabilities
- Investment planning
Based on monitoring of inflows and outflows, you can make various policies:
- Due dates for settling obligations — to ensure liquidity
- When to activate forced collection for unsettled receivables
Result vs. liquidity — not the same thing
The asset result is not closely tied to liquidity. Even if you have recorded revenue, if it has not been collected, the company may have operational problems in the short term — due to fixed costs that must be settled monthly.
Monitoring bank fees
With daily monitoring of the bank account balance, you can also track the methods of calculating bank fees from executed transactions. If your company has large turnover:
- Fee costs can be a significant expense
- Calculations differ also by the period of the day in which the transaction is executed
Cash register — just as important
In addition to the bank account, as a director you must be familiar with cash operations:
- Accurate cash balance at all times
- Proper keeping of the cash journal
- Depositing of daily takings on a daily basis
- Existence of a decision on cash maximum
Not sure how timely your bookkeeping is? Contact Finance Plus — we will perform diagnostics and recommend solutions for better liquidity control.
