Why Reconciling Your Bank Accounts Every Month Matters
You log into your business bank account and see money in the bank.
Everything must be fine, right?
Not necessarily.
Your bank balance and your bookkeeping records serve different purposes. One of the best ways to verify that your records accurately reflect activity in your bank account is through reconciliation.
What Is a Bank Reconciliation?
Bank reconciliation is the process of comparing the transactions recorded in your bookkeeping system with the transactions reported by your financial institution.
The goal is to identify and resolve differences.
For example, your books could contain:
- Duplicate transactions
- Missing transactions
- Incorrect transaction amounts
- Transactions posted to the wrong account
- Bank fees that haven’t been recorded
- Deposits that haven’t been properly matched
Without reconciliation, these problems can remain unnoticed.
Why Should You Reconcile Every Month?
Monthly reconciliation prevents discrepancies from piling up.
Finding an error from last week is usually much easier than investigating something that happened eight months ago.
Regular reconciliation also gives you greater confidence that the financial reports you’re reviewing are based on more complete and accurate information.
Reconciliation Can Help Identify Unusual Activity
Reconciliation isn’t a substitute for fraud prevention or professional fraud examination, but regularly reviewing account activity can help identify transactions that deserve further investigation.
Maybe there’s a charge you don’t recognize.
Perhaps a payment was processed twice.
Maybe a subscription you thought was canceled is still being charged every month.
Regular review gives you an opportunity to catch questionable activity sooner.
What About Credit Cards?
Business credit cards should also be reconciled regularly.
Credit card accounts can become particularly messy when transactions aren’t categorized correctly or payments to the card are mistakenly recorded as expenses.
Proper reconciliation helps ensure that purchases and payments are accounted for appropriately.
Why Clicking “Match” Isn’t the Same as Bookkeeping
QuickBooks Online offers powerful bank-feed tools, but software doesn’t eliminate the need for review.
Automatically accepting transactions without understanding what they represent can result in duplicate transactions, incorrect categories, or other errors.
QuickBooks is a tool.
Accurate bookkeeping still requires someone to review what’s happening.
Don’t Wait Until the End of the Year
If your accounts haven’t been reconciled in months, waiting longer usually doesn’t make the job easier.
Getting caught up now can help you enter the rest of the year with more organized records.
At Northeastern Oklahoma Bookkeeping LLC, bank and credit card reconciliation is an important part of helping small businesses maintain accurate books in QuickBooks Online.
Not sure whether your accounts are properly reconciled? Schedule a free consultation and let’s talk about the current condition of your books.