Keeping track of one’s financial situation is made easier with the help of monthly bank statements. These statements are sent out by financial organisations or banks. By visiting the bank’s website or logging into the net banking portal, customers with savings or checking accounts may see their statements online.
You can check your bank accounts weekly for numerous reasons. The most important of which is to identify any suspicious activity and avoid overdraft penalties and other costly financial mistakes.
Through this article, you will know the meaning of bank statements, their importance for customers and the company, and their long-term requirements.
Meaning of bank statement
The bank statement is a list of all the transactions carried out throughout a specific period in a particular month. The statement includes the account holder’s name, account number, and banking information such as expenditures, withdrawals, deposits, and deductions. Both the beginning and ending balances of accounts are shown on bank statements.
Importance of a bank statement
Bank statements are an excellent resource for you (account holders) to manage your finances. They may assist you in managing your accounts, identifying discrepancies, and discovering spending habits.
Here is the list of reasons why bank statements are essential
- Reconciliation and fraudulent activity detection
Account holders typically have 30 to 60 days after the bank creates a bank statement or e-statement at the end of the month to review the charges and reconcile their cash balance.
You may quickly identify suspicious behaviour in a bank account by reviewing the bank statement, which details all charges, dates, and associated payees. For instance, if a fraudulent transaction appears on a bank statement but you did not buy the product, you may call the bank and ask that the charge be investigated.
Through these account statements,companies can detect whether their employees or soon-to-be employees are involved in fraudulent activity.
- Planning a budget and managing your money
A bank statement may be considered a personal profit and loss statement. Being an account holder, you may monitor your funds. In addition, bank statements are an excellent resource for budgeting since they break down expenditures by category, making it easy to see where money is going.
These statements will determine your monthly expense by tallying up purchases made during that particular month.
- Account verification and credit check
Companies may use bank statements to assess employees’ creditworthiness. Before approving a loan, most banks and credit unions need to see your bank statements from the past 2-5 years.
The bank reviews the borrower’s bank statements and other credit papers as part of the creditworthiness assessment process. It applies to most loans, including mortgage loans, student loans, and loans for small enterprises.
Why is a bank statement required?
Investors, lenders, creditors, bank owners, and company managers all need access to a customer’s bank statements to determine the customer’s creditworthiness. Credit card offerings by firms and financial institutions use this information to verify loan applications. People requesting any loans, mortgages, or financial aid must provide bank statements as evidence of their income or employment.
Companies often need bank statements as a form of identification as they provide a summary of a person’s spending and saving patterns and the status of their assets. Since they include information that could be used to identify the account holder, bank statements are often used in addition to other forms of government-issued identification to verify a person’s identity.
Bank statements have several advantages
Banks send electronic bank statements to account holders at the end of each month. They are used to demonstrate account activity and check for discrepancies between deposited and withdrawn funds.
Here is a rundown of what’s in it for you if you choose to check your bank statements regularly:
- It helps you prevent financial scams
Monthly transactions such as withdrawals and deposits are recorded on bank statements. Financial data is recorded by banks’ intelligent document processing technologies, which end users may analyze to spot any inconsistencies or disparities in numbers.
The bank’s records of your transactions may be cross-referenced with your own to help you identify any suspicious financial activity. If there are no discrepancies, the data has been verified and is reliable.
- It helps to reduce accounting mistakes
Electronic bank statements are more trustworthy in this aspect than manual data input of financials, which is susceptible to human mistakes. Companies utilise automated bank statement extract solutions to automatically pull financial data, check it for accuracy, and enter it into the company’s accounting system.
Since data extraction from bank statements, reading, and recording transactions is automated, as a user you don’t have to worry about mistyped amounts, missing numbers, or accounting mistakes. Multiple financial institutions have already used AI-powered document processing software with these desirable qualities.
- Displays current and past due amounts, fees, and payments
When customers study their bank statements, they can see every transaction made in their accounts. By checking your account history, you can see how much money is coming in and going out of their accounts and any fees or penalties that have been assessed.
You will be informed if any unlawful charges or withdrawals have been made from their accounts. This eliminates a lot of the headaches and trouble with monitoring their accounts.
You should review your bank statement each statement period if you are utilising it to reconcile your accounts. Otherwise, you may look at it whenever you want. If you check your bank statement often, you may be able to catch mistakes before they cost you a lot of money or see patterns in your spending.
Reading and using your bank statement may help you get some very valuable insights into the entry and exit of your financial resources. It also helps keep your finances in order and prevents wasteful expenditure.