The importance of bank reconciliations
I know this is not a very exciting topic for a Saturday night, but it's an important one nonetheless.
I cannot stress enough how vital it is that your bank and credit card reconciliations are up-to-date and correct.
It is far to easy to miss duplicate transactions when you go a long time without reconciling. This can lead to an overstatement or understatement of income (depending on what was duplicated). You may find that a payment to a credit card was categorized incorrectly, which can throw off lots of things...balance sheet, income statement, balance in your credit card account, etc. You might find where a transaction went through your bank or credit card but was never recorded.
Reconciliations won't find EVERY error, but they will help you find many.
How to reconcile varies depending on which software you use. In Xero, you reconcile as the transactions come through on your bank feed and you add/match them. Then when you receive your statement from your bank, you run a reconciliation report that basically says that you're balanced (or not). In QuickBooks Online, you match/add transactions in the bank feed, then once a month you go into the reconciliation screen and follow the steps in there to check off what matches the statement.
It is crucial to use the actual statement that is produced each month by the bank. Don't log in to your online banking page and use the balance on there.
It is also very important that you don't allow the software to adjust things for you when your account in the software doesn't match the balance per the bank. FIND THE DIFFERENCE. The whole point of reconciling is to find where things didn't get posted (on either side)...if you let the software adjust it, you'll never find it. What's the point in reconciling when you do it that way?
Reconciliations are one of the many services I offer at Sustainable Bookkeeping. I have to admit, I think they are sort of fun. :-) If you would like to set up a preliminary consultation to have me take on your bookkeeping tasks, just visit my scheduling page.