You might have been told you should reconcile your bank accounts monthly but might have been confused about what that actually means. You might think it’s only for Boomers, but it is a practice everyone–especially business owners–should do on a monthly basis.

A bank reconciliation is matching the transactions in your accounting software to the activity in your bank account. It is comparing the two sources to make sure that no discrepancies occur. Here are 4 reasons why it’s important to reconcile your account monthly.

1. Catch Errors

Reconciliations are a great way to check your work. Reconciling ensures that the data entered is accurate and free from errors. If there was an error in the entry, a reconciliation will pick it up. Common errors include transposing numbers, entering the wrong amount, and/or forgetting to enter transactions.

2. Protect Yourself Against Fraud

Reconciling monthly is one of the best ways to train yourself to identify fraudulent activity on your account. Familiarizing yourself with your monthly charges is a great way to get to know the financial side of your business, and reviewing your books monthly helps to train your eye to quickly spot unauthorized transactions and phony charges. 

3. Make Sure Every Dollar is Accounted For

Discrepancies between what is in your account vs your bank statement can often be attributed to service charges and interest payments to your account. You can usually find these transactions recorded in a separate section on your bank statement from the rest of your account activity, and because they are listed separately, they are easily missed. It’s also possible that your accounting software may have failed to bring in those transactions. It is important to record these transactions so that you don’t miss interest income, or forget to record banking service charges–service charges are considered a tax deduction!

4. Make Sure There Are No Duplicates

Make sure that you have your accounting system set up properly. If you fail to do this, the software may categorize things incorrectly or may record duplicate transactions. This can result in income and/or expenses being reported twice. Reconciling will make sure that income and expenses are only being recorded once.

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Reconciling is an important part of making sure your finances are accurate. If you do catch a discrepancy, it is important to follow up immediately to see what is causing the issue and to correct it accordingly. Taking care of your books the right away will save you a lot of time and money come tax season.

If you need help with your bookkeeping, don’t hesitate to reach out to us! We are a virtual bookkeeping firm that serves the USA!