What Is Bank Reconciliation and Why Does It Matter Every Month?

What bank reconciliation is

Reconciliation is the dullest word in bookkeeping and the most important one. It means comparing two sets of records and making sure they agree. For a bank account, it means the balance your software shows should match the balance your bank shows, and you should be able to explain every cent of the difference.

A reconciled balance is a checked balance. It has been measured against the bank, and the gaps have been found and fixed. An unreconciled balance is just a number you typed. You do not know if it is right.

How it works

Your bank gives you a statement for the month. The statement shows every deposit, every withdrawal, and the ending balance. Your software also shows a balance for that account. You walk through the two lists side by side. A transaction in the software but not on the statement is usually something that has not cleared yet, like a check still on its way. A transaction on the statement but not in the software is usually something you missed, like a bank fee or an interest payment.

You work through each one until the two balances agree. When they agree, the account is reconciled for the month. You do the same for every account that carries a balance, checking, savings, credit cards, and any payment processor account.

Why every month

Reconciliation is a monthly habit because mistakes are easy to find close to when they happen. A charge you did not make shows up as a difference within a few weeks. A deposit that came through twice shows up the same way. The longer you wait, the harder it is to remember what a transaction was and whether it was right.

If you skip it for a few months, the differences pile up. What was a ten minute job becomes a day of digging through old statements. By reconciling every month, you keep the work small and you keep the balance you see in your software one you can trust.

A made up example for teaching

How we do it

We are QuickBooks Online Accountants (QBOA), so we work in the accountant side of QuickBooks Online every day. We work in Xero too. We work inside your QuickBooks Online or Xero file. You do not have to switch. If you already use one of them, we log in there and do the work. If you have no software yet, we help you set one up.

We use read only bank feeds through your accounting software. We do not move money, and we never ask for your online banking password. We reconcile every account every month, checking, savings, credit cards, and any processor account that carries a balance.

Then we close each month by the 10th. We categorize and reconcile in the first week. We send you one list of questions on day 8. We lock the period on day 10 and send your reports. The monthly routine matters more than the brand. Reconciled accounts, the same categories every time, and a month end close are what make the books trustworthy.

Mistakes we fix

• Skipping the reconcile step, so the software balance is just a number you typed.
• Letting months pile up, so a small job becomes a long dig through old statements.
• Missing a bank fee or an interest payment because it was never entered.
• Recording a transaction for the wrong amount and never catching it.
• Trusting a report when the bank balance and the software balance do not match.

What we do

We do monthly bookkeeping, and only bookkeeping. We work in QuickBooks Online or Xero, we reconcile every account every month, we close your books by the 10th, and we hand clean reports to your CPA at year end. Book a free 20 minute call and we will help you keep your books matched to the bank every month.

Questions people ask

Do I have to share my bank password? No. We use read only bank feeds through your accounting software. We never ask for your online banking password.

How often should I reconcile? Every month, for every account that carries a balance. Waiting longer turns a small job into a big one.

What if my books are months behind? We quote the catch up work first, then move you onto the monthly routine once the past months are reconciled.

Do I have to switch software? No. We work inside your existing QuickBooks Online or Xero file. If you have no software yet, we help you set one up.