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Bookkeeping - Monthly Bank and Credit Card Reconciliation

Bookkeeping Reconciliation


For business owners, maintaining accurate financial records is crucial. This includes keeping a watchful eye on your bank statements and credit card transactions.


 

What is Reconciliation?


Reconciliation compares your internal accounting records (your books) with external records from your bank and credit card companies. It involves matching each transaction in your books to a corresponding transaction on your bank or credit card statement. Any discrepancies are then identified and resolved.


  • When performing a bank reconciliation, discrepancies may arise due to outstanding checks, deposits in transit, or bank fees that have yet to be recorded.

  • When performing a credit card reconciliation, one can catch errors, unauthorized charges, or missing entries.

 


The Importance of Reconciliation


Accuracy and Transparency

A well-reconciled set of books instills confidence in stakeholders, providing a transparent view of a company's financial health. It ensures that errors are caught early and rectified promptly.

 

Fraud Prevention

Discrepancies and suspicious transactions are more likely to be identified swiftly by regularly cross-referencing records. This proactive approach saves a company from falling victim to fraudulent activities, protecting its assets and reputation.

 

Budgeting and Financial Planning

Decision-makers can make informed choices about investments, expansion, or cost-cutting measures by knowing where the company stands financially. A clear financial picture allows for strategic planning and ensures the company's long-term stability.


 

When to Reconcile Bank and Credit Card Statements


The frequency of reconciliation depends on your business activity. Here are some general guidelines:

  • It's recommended to reconcile your bank accounts at least monthly, especially for high-volume accounts.

  • Reconcile credit card statements as soon as you receive them, as these are more prone to fraudulent charges.


 

The Reconciliation Process


Here's a step-by-step guide to reconciling your bank and credit card statements:

 

  1. Collect your most recent bank statement and credit card statement.

  2. Review your accounting records (checkbook register, bookkeeping software) and identify all transactions for the corresponding period.

  3. Mark off each transaction in your records shown on the bank/credit card statement.

  4. Look for any unmatched transactions on either side. Common discrepancies include:

    1. Outstanding Checks: Checks were issued but have not yet been cleared by the bank.

    2. Deposits in Transit: Deposits were made but have not yet been reflected on the bank statement.

    3. Bank Fees: Service charges or other fees imposed by the bank.

    4. Credit Card Errors: Typos, unauthorized charges, or returns not reflected in your records.

  5. Investigate the reason for each discrepancy. You may need to contact your bank or credit card company or revisit your records for clarification.

  6. Once a discrepancy is resolved, make the necessary adjustments to your accounting records. For example, record outstanding checks or categorize bank fees.

  7. When all discrepancies are resolved, mark the reconciliation as complete and store the reconciled statements for future reference.

 

Tips for Easier Reconciliation


  • Many accounting software programs offer automatic bank feeds and categorization tools that can significantly reduce manual effort during reconciliation.

  • Categorize your transactions as you go throughout the month.

  • Review your bank and credit card statements regularly, not just during reconciliation.


 

Please remember that accurate financial records are the foundation for informed decision-making and a healthy business.


Contact us for more information about bookkeeping.

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