Reconciling your bank statement in QuickBooks.
If I have my bank accounts linked in QuickBooks, do I need to reconcile them?
Yes, you should be reconciling at least your bank accounts monthly. The biggest reasons are:
- Detect Fraud: To catch fraudulent charges as quickly as possible and report them to your bank, you need to be able to notice those charges. If you are not reviewing and reconciling your accounts with the bills you’ve entered into QuickBooks (or whatever accounting software you use), you can miss them. This is especially true if you run a lot of smaller or similar-priced transactions through your business.
- Catch Bank Feed Errors: Your bank feed can contain errors. I’ve seen accounts become unlinked and transactions not load. Recently, a client’s credit card charges were uploaded twice—once for the day the credit card was run, and again for the day it cleared the account. Your accounts and financial reports will tell you the wrong information without reconciling the account to catch these issues.
- Correct Human Errors: You can add human error if you write out your checks instead of printing them from your software and then typing the amounts into your accounting system. Reconciliation can help you find that $154 check that was keyed in as $145. The rule of thumb is if you’re off by something divisible by nine, it’s probably two numbers switched around. Sometimes, the error could also be on the bank’s side where something is misentered. You need to contact your bank to correct the information promptly.
- Ensure Tax Compliance: Incorrect numbers in your records can affect your tax reporting. Incorrect transactions could cause you to overpay or underpay your estimated or sales taxes.
- Avoid Overdrafts: Missing expenses in your bank feed can lead to spending money you don’t have, resulting in fees and penalties. This can especially happen if your cash flow is tight.
- Maintain Accurate Financial Statements: Having incorrect financial statements can cause you to make inaccurate assumptions about your current business finances and could lead to choices that cause issues in your business.
By regularly reconciling your accounts, you can rest assured that your financial records are accurate and up-to-date. This provides a solid foundation for managing and growing your business, giving you peace of mind.