How do I know if my Bank Reconciliation is Accurate?

You have been doing the reconciliations in your accounting software but do not know if they are accurate. You do them because you have always heard that doing the bank reconciliations for your business accounts is important.

What is the purpose of reconciling your accounts? What should you look at when you are reconciling? How can you have confidence that your reconciliations are accurate?

We are here to guide you through the process.

Purpose of bank reconciliations

Bank reconciliation is the process of comparing your financial records (such as your records in your QuickBooks Online file) with those of your bank to ensure that they match. You take on the role of a detective: You are looking for any discrepancies between your transactions and the bank’s records.

Ideally, you should reconcile your accounts each month. This helps to catch errors early and also makes the process less overwhelming. Waiting too long can lead to confusion and make it harder to identify discrepancies.

What to look at when reconciling

Start by matching each transaction in your records to those on your bank statement. In most accounting software platforms, the bank reconciliation feature allows you to check off each item so that you can ensure nothing is overlooked.

Enter any missing transactions. Most discrepancies occur due to simple errors, such as typos or missed entries.

Investigate Unmatched Transactions

Now is the time to put your detective hat on. Once you have matched all items on your bank statement to transactions in your records, look at what transactions are remaining.

Timing is everything in finance. Some transactions in your records might not have cleared the bank yet, leading to discrepancies. So those transactions most likely will clear on the next statement.

Other transactions may require a deeper investigation. Deposits and electronic payments generally clear immediately or within a few days. Look to see if you have any that have not cleared. There could be a duplicate transaction in your records or an error that needs to be removed.

Also look at all outstanding checks. How old are they? If they are older than 30 days, you should find out if the recipient received the payment. You may need to put a stop payment and reissue a new check if the check has been lost.

Getting professional assistance

There are instances when seeking the expertise of a professional is advised. Accountants and bookkeepers can efficiently navigate through the reconciliation process, saving you valuable time. If you have a busy schedule or find the task overwhelming, delegating it to an expert ensures that it’s done accurately and in a timely manner.

Ultimately, seeking the help of a professional provides peace of mind. Knowing that a qualified expert has reviewed your financial records and reconciled your accounts can alleviate stress. It also allows you to focus on other aspects of your life or business.

Whether you take the DIY approach, or hire an accountant or bookkeeper, having accurate bank reconciliations is the first step in maintaining accurate business records.