Authored By: Connie Ward, in our Logan Bookkeeping Department
With the convenience and popularity of online banking, the basic task of monthly bank reconciliation sometimes gets overlooked. However, monthly reconciliation is one of the most important tasks in a business.
3 reasons you need to reconcile monthly are:
1. Validates Data Entry
Reconciling your accounts each month will help identify data entry errors. One data entry error example occurs when transactions appear on the bank statement but were never entered in Quickbooks. Another example includes transactions that were recorded in Quickbooks but were maybe coded to the incorrect bank account. I recently had a client discover through reconciling that 2 of their contributions that were processed to fund HSA contributions were cancelled through their provider. These transactions were entered in Quickbooks but never showed up on the bank statement.
2. Confirms Financial Statements Are Accurate
Reconciling your bank accounts each month confirms that all transactions that have been recorded on your bank statements have been entered into Quickbooks. This means that your financial statements reflect all sales and expenses.
3. Accurate Tax Reporting
The financial data you enter into Quickbooks is what is used to prepare the annual tax return. If you have not been reconciling your bank statements on a regular basis, it is likely that your financial statements are not accurate and this leads to reporting incorrect information on the tax return.
Checking accounts are not the only ones that need to be reconciled. Credit cards, savings accounts, and loans should all be reconciled monthly. If these accounts are all reconciled, you will save time and money when it comes to having the tax return prepared.
Even if you have a low volume of transactions, you should still be reconciling your accounts each month. In addition to the 3 reasons always mentioned, it can alert you to any fraudulent activity that may be occurring on your account.
For additional information, feel free to contact one of the professionals at Cook Martin Poulson, PC.