Bank Reconciliations – the Why and the How

 In Tuesday’s Tips

Your bank account is the ultimate truth in your business, so it’s important that your books are reconciled to the statements. Any number of things can happen throughout the course of the month: duplicated or missing transactions, wrong dollar amounts, etc.

When you get your statement, check off the transactions that cleared. But more importantly, take note of the transactions that didn’t clear – these are the ones that need to be researched. Are they duplicates? Are they posted in the wrong bank account?

Another discrepancy we see is that the mobile deposit never went through. You record the payment as deposited in QB, but it technically never made it to the bank, but you’d never know it if you didn’t reconcile your bank!

The only transactions that should be left uncleared at the end of the month are checks that were mailed and not cashed yet, or any debit card transactions in the last day or two (clearing following month). Once you’ve fixed any erroneous transactions, and the variance is $0, your reconciliation is complete.

Going through this process keeps your books accurate and creates a good paper trail in case of an audit. Even if you use automatic bank feeds or imports to record transactions, it’s still important because technology is not perfect!