February 22, 2022
If you’re new to the world of business accounting, then some concepts, such as reconciling your bank accounts, are probably new to you. Maintaining proper bookkeeping for a business is a bit more arduous than just balancing a household budget, and it requires more regular work.
Periodically reconciling your bank accounts is a great practice to help keep your books in order, catch any discrepancies on time, and make filing end-of-year taxes easier. Here is everything that you need to know about this process.
What Does Reconciling Your Bank Accounts Mean
Reconciling bank accounts is an accounting process that compares your bank statements to bookkeeping records and checks for any discrepancies.
You may already do this for your personal finances when you check your credit card statement against the receipts for the month.
Reconciling bank statements for a business is a bit trickier. You need to check both your income, which includes payments from customers across many different platforms, and your spending, or business expenses.
Depending on your business, you may have to repeat this process with different accounts, such as multiple bank accounts, payment processors such as PayPal, and even a cash register.
Most accountants recommend reconciling your bank accounts at least once a month, right after you get your bank statement. This helps you catch any mistakes immediately.
The Importance of Reconciling Your Bank Accounts
Regularly reconciling your bank accounts is an important part of business accounting. The process of reconciliation gives you a clear picture of your business’s financial health. By knowing exactly how much you have in your accounts and catching any recurring expenses, you can adjust your business practices to better reflect your financial health.
Reconciliation is also important for catching discrepancies and fraud on time. If you notice any differences between your accounting records and your bank statement, follow up on that discrepancy immediately. It could be an accounting error, in which case, catching it now will make tax season easier.
If you suspect that the discrepancy is a potential fraudulent charge, reconciling your bank accounts makes it easier to address it in time. If you contact your bank with suspected fraud immediately after receiving your bank statement, they are more likely to act and return your money quickly than if you wait a few months.
How to Reconcile Your Bank Accounts
There are a few methods you can use to reconcile your bank accounts. The most traditional method is going through your bank statements and matching them to your accounting records using pen and paper. This method is easy, but tedious, and it gets confusing if you have multiple records.
If you have a business, consider opting for accounting software. Accounting software has features to make all aspects of accounting, including reconciling your bank accounts, easy. Most accounting programs are user-friendly and easy to incorporate into your business.
If you need help with your bookkeeping and accounting, don’t hesitate to schedule a consultation with us!
Even though we are based in Albany, NY, we offer our expertise in business accounting, bookkeeping, and tax preparation all across the United States.