Bank Reconciliation!
- Amazinggracebookkeeping
- Mar 21
- 2 min read
Easy as pie, just verify!
What is a Bank Reconciliation?
Definition:
“Bank reconciliation is the process of comparing your business’s internal financial records with your bank statement to ensure the balances match” (quickbooks.intuit.com).
In essence, a bank reconciliation allows you to see if there is a discrepancy between your records of income and expenses compared to what is going on in and out of the bank account. It is a very useful bookkeeping tool to help with proper record keeping.
Why Reconcile?
Like mentioned above, a bank reconciliation helps you find errors and keeps track of what is going on with your income and expenses. It also gives you a picture of how you business is doing financially and helps produce “end of the year” financial statements for tax time.
How to Reconcile?
First, it is good practice to try to reconcile monthly so you don’t get behind. This will allow for less mistakes and better bookkeeping.
Second, gather all your documentation (bank statements and invoices etc. ) and compare the transactions from the bank statement to what you have in your automated accounting system/software if you have one.
Third, make sure there are no differences and classify the accounts correctly. If there are differences you may have to make adjustments. Lastly, check the balances to see if everything matches. *If you have cash receipts you can make journal entries to include in your software after you reconcile!
Common reconciliation mistakes that you could encounter could be: duplicate entries, transposed numbers, bank balances entered wrong, dates entered wrong, bank fees not recorded, accounts incorrectly classified, invoices not created or checked off etc.
For example, you may record expenses manually and also have a linked bank account that automatically creates entries, thus creating duplicate entries which can make things more complicated when reconciling. So, it is important to double check or verify the actual bank statements to the automatic feeds when you reconcile before you make those manual entries because they may already be there! This way you can avoid mistakes and have accurate records for your bookkeeping.
Bank Reconciliation Closing Thoughts:
Lastly, bank reconciliations allow you to avoid errors and to keep track of how your business is performing financially. Thus, it will help you make better decisions for the future.
As you keep up with the reconciliations, it will ensure a smoother “end of the year” tax filing process too. Overall, bank reconciliations is an important tool that helps your bookkeeping stay organized and accurate.
**If you need more help with bank reconciliations you can find a step by step guide from QuickBooks. See the link below :
If bookkeeping becomes too much, think about hiring a bookkeeper! It could save you time and money!
** DISCLAIMER: This blog is not intended to give you any tax or legal advice just a guide to help.
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