Necessity of Bank Statement

A bank statement is indeed a monthly budget document that summarizes the activity of the account holder. Bank statements are typically prepared by the bank at the end of each month for the account holder. Bank statements are available online through online banking or at a branch of the bank. Account statements and transaction overview statements are other names for them.

Cash flow motions to and from accounts are shown on bank statements. In a nutshell, a statement details all of the transactions that occur month after month, providing an overview of the account holder’s finances. A typical bank statement includes the following items:

• Dates and Transaction IDs
• Beneficiary names,
•  Transaction Information

Other information found on bank statements includes:

• Customer service phone numbers
• Address
• Accounting reporting special instructions

Purpose of Bank Statement

Financial Planning and Budgeting

A bank statement is similar to a personal profit and loss statement. Account holders can use it to maintain track of their finances as well as plan for the future expenses. Bank statements are also extremely useful for budgeting because they allow account holders to determine how much they spend on various categories. An account holder, for example, can measure their monthly food expenditure by adding up individual transactions.

Reconciliation and Fraudulent Activity Detection

Account holders are typically given 30-60 days to analyze the charges and reconcile their cash balance after the bank readies a bank statement as well as e-statement at the end of next month. Because the bank statement includes all charges, as well as the respective dates and payees, it can assist account holders in identifying any fraudulent activity. For instance, if the bank statement shows a charge for a transaction in which the account holder did not participate, they can contact the bank and request that the fraudulent transaction be investigated.

Credit Validation

Bank statements could also be used to assess the account holder’s creditworthiness. Before making loans to individual clients, most banks and financial institutions require confirmation of bank statements for the previous 2-5 years. Banks examine the borrower’s bank statements as well as other credit documents to determine his or her creditworthiness. It applies to the majority of loans, which include residential mortgages, student loans, and small business loans.

Advantages of Bank Statement

Banks send electronic bank statements to account holders via email at the end of each month. Bank statements are being used to demonstrate account activity and to ensure that there are no discrepancies in credit and debit amounts.

The following are some of the advantages available to account holders who do choose to view one‘s bank statements online:

Accounting errors are reduced

Manual financial data entry is prone to human error, and electronic bank statements are shown to be quite reliable in this regard. Organizations use automated bank obtain statement solutions to obtain financials automatically, validate, confirm, and enter them into records. This means that users do not have to be concerned about mistyped amounts, missing data, or accounting errors because the entire extraction process is automated. Several banks use document AI software for this purpose, which is also fast, precise, and dependable.

Prevents financial fraud

Every month, bank statements print the withdrawal as well as deposit amounts from an account. Banks use intelligent documentation solutions to list financials on these records, which helps users identify any mismatches or errors and omissions in amounts. You can use the bank’s recorded transactions to detect financial fraud by comparing them to your very own personal records. If there are no mismatches, the records are correct and valid.

Account balances, sanctions, and settlements are displayed

One of the primary benefits of evaluating bank statements is that users receive a comprehensive list of their transactions. Individuals can learn how their money is flowing in or out of their account by reviewing account balances, penalties, expenses, and settlements. Account holders are not caught off guard by hidden charges and thus are alerted to unauthorized transactions. This makes managing their accounts far easier and less time-consuming.

Conclusion

A bank statement is intended to show you precisely what happened with your account over the previous month, including your spending patterns and any incurred expenses. Most bank statements begin by clustering all deposits together, giving users an idea of what came into your account the previous month. Following that, you’ll see a summary of your withdrawal activity. Your summary will show your account balance at the start of the month, followed by your ending account balance after all deposits and withdrawals have been made.