In a nutshell: the accounting records on your company’s books and the figures on your bank statement should match up, but if they do not then this is what triggers the need for a bank reconciliation. The process of completing a bank reconciliation is important because it helps to identify any errors and mistakes so that they may then be rectified.
There are a number of possible causes for this discrepancy. This could be because fees, interest or charges have not been recorded correctly. It may be due to an error or mistake in the accounting records. This could also be an indication that someone has fraudulently altered the figures on the statement and recorded them as part of your company’s records.
There is no need to worry if managing your accounts is a little tricky. There are many online systems and software packages that make bank reconciliations somewhat simple, but a well-trained accountant that understands the intricacies of accounting should always be used.
The process of completing a bank reconciliation could take up to two hours, but can be completed within half an hour on some occasions. The main things are to make sure that the figures on both statements match and there is nothing unusual or suspicious recorded in the transaction history.
There are a couple of ways in which the process can be simplified.
“Always contact your bank immediately if you experience any issues with your statements or any unexpected changes to your accounts” – says Eric Liebmann, CPA, CA. Eric has spent more than 10 years in audit and assurance, frequently helping his clients detect anomalies and inconsistencies – saving them countless headaches and thousands of dollars
Why don’t the balances reconcile? If the balances do not reconcile, you can check through your accounting records to see where the discrepancy is. There could be many reasons why the bank statement does not match up with your accounting records.
It could be that there has been an error in one of the statements or a mistake in recording transactions. If so, then they should both be corrected and revised until they are consistent. You may also need to adjust your accounting records to bring them back into balance.
You should also compare the figures on your accounts to the figures on the original bank statement. This will make sure that nothing has been recorded incorrectly.
QuickBooks Online offers many features that make accounting easier, including the ability to reconcile bank accounts. However, many people do not know how to use this feature. This guide will cover some of the basics about reconciling bank accounts and how to do it.
The first step is ensuring all transactions for the month have been processed either manually or through QuickBooks Online bank feed. Once that is complete, let the fun begin!
#1 - Make sure you have the bank statement for the account you’ll be reconciling at hand
#2 - Top right-hand corner, click on the Gear Icon, under Tools, click on Reconcile / or go to navigation menu on left-hand side and click on Reconcile and select the account you’ll be reconciling
#3 - Verify that the beginning balance matches your bank statement
#4 - Enter the ending balance from your bank statement
#5 - Enter the bank statement’s ending date
#6 - Click the green Start reconciling button
#7 - Check off all transactions that match with your bank statement
#8 - The difference should be $0.00
#9 - Click the green Finish now button in the upper right corner
No matter how well-organized your books are, it's important to reconcile at least once a month in order to catch mistakes before they happen or risk losing control of your business.
It's challenging because you have to reconcile some accounts manually. You may be required to use paper and pencils, which is so last century. Reconciling an account can take hours, while every minute counts when it comes to running your business. There are apps for doing bookkeeping, like QuickBooks Online, but they don't replace critical thinking and years of experience that you can get when outsourcing to an accounting firm.
Not sure you are up for it? Want to spend your time better? Get in touch with the team at Elevate – we do this full time and we have helped countless clients save thousands of dollars in mistakes.
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