To reconcile or not to reconcile?!?

I’m often asked, “Why should I reconcile my bank accounts and credit cards?” The answer is simple: even the best software can make mistakes. If you rely on QuickBooks, your accounting software, or your bank to always communicate perfectly, you may be in for an unpleasant surprise when you discover duplicates, missing transactions, or even fraudulent activity.

Studies show that there is an attempt to breach someone’s systems every 39 seconds. If you’re not regularly verifying your accounts, and if multiple people can access your accounts or credit cards, it can be nearly impossible to spot smaller, more subtle fraudulent activities. Regular account reconciliation ensures you’re not only catching fraud but also that your legitimate transactions are properly recorded—without duplication or omission.

Moreover, if you’re ever audited, the bank statements will be the key verification tool auditors use to validate your financial data. Those statements are often more reliable to auditors than what’s entered into your accounting system, which means your financial records should accurately reflect the information on those documents.

While reconciling can be a hassle, it’s essential for keeping your financials in check. Here are a few tips to make the process smoother:

Tips for Effective Reconciliation:

1. Ensure Consistency in Deposits: When you deposit multiple checks in one lump sum, ensure you record the deposit in your accounting software exactly as it appears in the bank (i.e., as one combined deposit, not individual checks). This simplifies matching your bank statement to your accounting records.
2. Understand Merchant Fees: If you’re using a merchant processor, know how they take their fees. Are they deducted daily or at the end of the month? If your accounting software doesn’t account for these fees, your invoices might appear partially paid, leading to discrepancies when you reconcile your bank account.
3. Use Sorting Tools: Most accounting software lets you sort transactions by dollar value. Use this feature to bring larger amounts to the top or bottom of your list, helping you identify any transactions that may have been missed.
4. Mind Date Differences: Accounting software may record transactions a day or two later than they appear on your bank statement. For example, a transaction may show up on your bank statement on the 30th, but your software may record it on the 1st. Adjust the dates in your software to reflect this, or if your software automatically selects wrong items, pull up the bank register and manually adjust the date for accuracy.
5. Mark Items Off as You Go: When reconciling, it’s helpful to mark off transactions as you verify them. If you’re using a PDF statement, use a PDF editor to highlight transactions as you confirm them. In QuickBooks, for instance, you can check the box next to each transaction to mark it as cleared. This makes it easier to spot discrepancies.
6. Align Data in Your Software with the Bank Statement: To stay organized, arrange your accounting system’s data to match the format of your bank statement. If your statement lists deposits first, select only the deposits and order them by date. This alignment makes it easier to match items and spot missing transactions.

By following these tips, you’ll streamline your reconciliation process and reduce the chances of overlooking errors or fraud. While it may seem tedious, taking the time to properly reconcile will ultimately save you from bigger problems down the road.

Stay tuned for more insights from my 25+ years of experience, working with both Intuit and my own clients, as I continue to uncover common financial issues businesses face.