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Ten Common Mistakes While Reconciling Your Bank Account


Bookkeeping mistakes
Ten Common Mistakes While Reconciling Your Bank Account


It is the time of month when you need to close out your accounting books and keep them clean. Reconciling your bank account (bank statement) is a crucial step in the closing process.

 

Here are the ten common mistakes to avoid:

 

  1. Failing to record all transactions: Record every transaction in your accounting system. Missing transactions can lead to discrepancies between your balance sheet and the bank statement.

  2. Recording transactions incorrectly: Double-check the accuracy of transaction entries. Entering incorrect amounts or dates can cause reconciliation issues.

  3. Not accounting for bank fees: Include any bank fees or charges in your reconciliation process. These can impact your account balance.

  4. Starting with an incorrect opening balance: Ensure that your accounting software's beginning balance matches the actual starting balance. If it’s incorrect, your account won’t reconcile properly.

  5. Failing to identify and resolve discrepancies: Regularly review reconciliation reports and promptly address any discrepancies. Ignoring discrepancies can lead to financial inaccuracies.

  6. Failure to utilize the synchronization API: You are not using the synchronization functions in your accounting software to sync up the transactions between your bank and your accounting software.

  7. No regular schedule: Bank account reconciliation must be done monthly or minimally quarterly if you have very few transactions. This will allow you to catch any transaction issues before they become serious.

  8. Creating accounting entries for differences: Adjusting unreconciled balances using accounting entries should be done cautiously, as it may mask errors or fraudulent activity. Instead, investigate the cause of the difference and correct it at its source. Doing it this way may be perceived as “cooking” the books.

  9. Neglecting proper documentation: Proper documentation is essential when reconciling bank accounts, especially when dealing with large or complex transactions. Keep all relevant documents on hand during the reconciliation process to ensure the accuracy and completeness of your financial records.

  10. Ignoring outstanding checks and deposits: Outstanding checks and deposits that haven’t cleared or been posted yet can complicate the reconciliation process if not accounted for properly. Gather all unpaid and uncleared transactions before beginning a reconciliation and refer to them during the process.

 

There are more than ten ways to avoid this while reconciling your bank account. The bottom line is to make sure the accounts are reconciled regularly and match the records in the statements that your bank provides.


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