Bank reconciliation in ERP and its features
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Bank reconciliation in ERP and its features

When the balance in the books of accounts of an organization does not match what is supposed to be in the bank account, it is a thing to worry about. At every point in time, what an organization has in its bank accounts should match what is recorded in the books of account kept in the organization's office. When there is a disparity, then there is a need to reconcile the accounts.


The book balance is the figure an organization has in its books while the bank balance is what the bank says exists in the bank account of an organization. The point of bank reconciliation is to know what caused the difference in their balances, if there is any. The point of having a bank reconciliation include:

- OVERDRAWN ACCOUNT: When a bank account is overdrawn, the bank charges the organization to the tune of its overdrawn balance. Every organization will try to avoid this situation as much as possible because it eats into the profit of the organization. It is only when the organization requests for its bank account to be overdrawn that it does not bother about it. In such cases, it must be because they need funds to meet their temporary needs.

Bank reconciliation ERP

Bank reconciliation ERP helps to track this difference so the organization can ask for an immediate correction immediately if it is an error on the part of the bank. If it is from the side of the organization, then they will try to make payments to offset further charges.

- BOUNCED CHECKS: A bank reconciliation erp will help an organization know if any of its customers' check bounced. It is important that the organization knows because they must have supplied the customer with goods. Besides, they may also have issued a check of their own believing that that of the customer they paid in has cleared.

- RECORDING ERROR: A bank reconciliation erp detects if an entry has been recorded in error, either from the part of the bank or that of the organization.

- FRAUD: A bank reconciliation erp helps in the detection of fraud if it happens. Without a bank reconciliation on a regular basis, fraud might take place without anyone detecting it early enough.

- FEES: One other point for a bank reconciliation is to know if there are fees charged by the bank that the organization does not know about. The organization also check if the fee is a rightful one or should not have been charged in the first place. Fees charged by the bank may be an overdraft fee among others.

Bank reconciliation in ERP

FEATURES OF A BANK RECONCILIATION STATEMENT: There are features that must be present in a bank reconciliation statement. They include:

- STATEMENT OF ACCOUNT: It is not a ledger at all. It is simply a statement that tries to arrive at what caused the difference between the closing balance of the bank account and that of the organization's book balance. To reconcile a bank account, it is either the book keeper begins from the balance of the bank account to arrive at the balance of the book balance; or the book keeper begins at the closing balance of the book balance to arrive at that of the bank balance.

- NOT A BOOK OF ACCOUNTS: It is not a book of accounts. This means it is not kept like the other books of accounts such as purchases ledger, sales ledger, debtors ledger, creditors ledger, and so on. It does not serve any other purpose than to find the difference between the closing balances of the bank accounts and that of the book balances. In a situation where the figures of the book balance and that of the bank balance are the same no one even needs it.

Bank reconciliation

- IT IS PERIODIC IN NATURE: The existence of a bank reconciliation depends on when the book keeper decides to reconcile what is left in the bank account against that of the book keeper's record. Depending on the volume of transactions of the organization or how early the book keeper wants to track any differences;it may be prepared on a weekly ; bi-monthly; monthly; quarterly; or even yearly basis.

- A PRODUCT OF DISAGREEMENT: There is no need for a bank reconciliation statement to be prepared where the bank accounts match the book balance. Therefore, a bank reconciliation statement is a product of disagreement.

A Bank Reconciliation ERP product is very essential as it helps an organization detect fraud if it ever occurs. It is a way of maintaining checks and balances on what the book keeper does. There is need for a bank reconciliation statement only when a disagreement arises between the book balance of an organization and its bank accounts.
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