Common Bookkeeping Mistakes - #3 Not Reconciling Accounts

Are you a member of the "balance the checkbook to the penny" club? Or do you belong to the "as long as we're within $500 most of the time, we're good" club? Or do you just look at your bank balance online, see that there is still money in your account, and call it good?

Reconciling your accounts (both bank and credit card) on a regular basis is vital to accurate bookkeeping in your business. It ensures accuracy in your records, and it can also help you find mistakes on the bank's end of things. (I've seen it happen!) It is best to do this at least once a month when you receive your statement. If your account has a lot of activity, you may find it easier to do it on a weekly or daily basis.

Do you need to balance to the penny? It really is best to do that. A nickel here, a quarter can all add up. In order to have accurate records and to make sure that your receipts match the transactions in your accounts, you need them to match. That way things can get categorized properly and subsequently reported properly on your financial statements. "I think that's right" or "Somewhere around there" will not cut it when you're applying for a loan or dealing with an IRS audit.

There are several methods to reconcile your statement. If you are a paper and pencil person, most bank statements have a worksheet on the back that walk you through the steps of account reconciliation. If you are using bookkeeping software, most have account reconciliation as part of their features. Some have a way for you to upload your bank's statement as a CSV file to the software to reconcile against, and some Cloud-based software can tap directly into your bank account (through secure means, of course!) to provide real-time reconciliation information. Software-based reconciliations allow you to click a couple of buttons and not only reconcile your bank account but also categorize your transactions...all at the same time!

Sometimes people are intimidated by account reconciliations, but truly, they shouldn't be. Find the way that works best for you. If you need to reach out for help from someone knowledgeable, do so. Account reconciliations are a basic service that almost all bookkeeping services provide. (Mine does!)

Successful businesses perform accurate account reconciliations...determine that if you are not doing so already, 2016 will be the year you begin!