Periodically reconciling all of your banking, credit card, lines of credit and even accounts that only accumulate accrued interest is always the first step in bookkeeping maintenance and ensuring your financial reports are accurate.

I have seen too many times where the books (even the most complicated books) are maintained like clockwork with expertise, however none of the funding accounts (banks/credit cards) were officially reconciled to any bank statements, etc.

Reconciling tasks serve two very important purposes:

  1. Like balancing your checkbook, an ending reconciled balance lets you know your true ending disposable funds balance (suppose you have vendor check payments or customer deposits that have not cleared your bank yet). This is important so you don’t wind up overdrawing your bank or credit accounts.
  2. Reconciling tasks are also verifying EXACTLY what really cleared your funding accounts. Suppose you accidentally posted the same vendor check payment twice in your books; in this scenario this will alter your financial reports in two very important ways:
  1. This will make your disposable funds appear smaller than reality; and
  2. This will also make your profit and loss report look LESS profitable than reality.

I always recommend to clients to ALWAYS reconcile your cash and credit accounts either on a weekly, monthly or quarterly basis. The more activity you have going on in your business, the more often you should be grabbing financial docs from your banks and credit cards and reconciling your books to them.

It’s really quite a pain to have to play catch-up, especially when you are months or years behind in your bookkeeping, in order to be able to submit financial reports to auditors, tax agencies and investors. Reconciliation work is typically only one step in catching up and maintaining your books but vital.


Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.


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