6 steps to reconcile like a Pro

Reconciling your bank account is an essential part of bookkeeping. It involves comparing the balances on your bank statement with the balances in your bookkeeping records to ensure that they match. This process helps you identify any errors, discrepancies, or fraudulent activities, and ensures that your financial records are accurate. In this post, we will go over the seven steps to reconcile your bank account. Credit card, investment accounts, savings accounts, and any other accounts with transactions need to be reconciled on a monthly basis.

Step 1

The first step is to gather all the documents and information you need to reconcile your bank account. This includes your bank statement, any canceled checks, deposit slips, and your bookkeeping records. You can use your accounting software to import transactions from your banking website, or upload them yourself.

Pro Tip: If you are entering bills, deposits, etc. into your software, make sure you are matching the bank transactions to the manually transactions already entered in the software.

Step 2

Compare the beginning balance on your bank statement with the beginning balance in your bookkeeping records. They should match. If they don’t match, investigate the reason for the discrepancy.

Pro Tip: The ending balance of your previous statement should be the beginning balance of your current statement

Step 3

Record any outstanding checks and deposits that have not yet cleared on your bank statement. Add outstanding deposits to the ending balance, and subtract outstanding checks from the ending balance.

These are checks that have been issued to vendors, but they have not deposited the check. For example, if you wrote and mailed a check on the last day of the month, there is a high chance that check will not be cashed until the following month. Accounting for these situations helps show a true balance of cash available.

Step 4

Compare the deposits and checks on your bank statement with those in your bookkeeping records. Check each item to ensure that it is correctly recorded in your bookkeeping system. If you find any discrepancies, investigate them.

Pro Tip: If you are using an accounting software like Quickbooks Online, you can easily tell if an entry is manually created, or imported by bank feeds. Check out the picture below: transactions in the reconciliation window with the green box beside them are bank feed transactions, while the transaction with no marker has been manually entered. Make sure all manually entered transactions are matched to the correct bank feed transactions. Ignoring this results in transactions being duplicated–a big no no! This could skew your accounting reports and cause tax issues by overstating your expenses–yikes!

Step 5

After verifying all transactions, reconcile the ending balance on your bank statement with the ending balance in your bookkeeping records. They should match. If they don’t match, double-check all the transactions and make sure there are no errors or omissions.

Step 6

If there are any discrepancies, make the necessary adjustments to your bookkeeping records. This may involve correcting errors or adding missing transactions.

Reconciling monthly will keep your records up to date and accurate. If you have having trouble getting the account to balance and can’t seem to find any differences in your records vs the statement. Take a step back, move to something else, and come back in 5 or 10 minutes with fresh eyes. You won’t believe you didn’t catch that .53 that was supposed to be .35 on one of your transactions 😉

Still having trouble? Check your statement for any bank charges or interest that would not be identified as a transaction in the actual statement.

Recap

Once you have reconciled your bank account, make sure to save all your records, including your bank statement, canceled checks, and deposit slips. This will help you in case of any future questions or discrepancies.

Pro Tip: I recommend saving everything digital. Here is a list of items I save for each reconciliation:

• Bank Statement
• Reconciliation Summary

Make sure all receipts are kept for documentation should Uncle Sam come knockin’. You can choose to file paper copies or file electronic copies. Do whatever is easiest for you personally.

By following these steps, you can reconcile your bank account accurately and efficiently. Reconciling your bank account regularly can help you keep your financial records accurate and up-to-date, and ensure that your business is on track.