Bank Reconciliation Explained: What It Is and Why It Matters
Bank reconciliation is one of the most important monthly tasks in bookkeeping. Here's what it is, how it works, and what happens when you skip it.
Bank reconciliation is one of those tasks that sounds technical but is actually straightforward once you understand it. It's also one of the most important things you can do to keep your finances accurate.
What Is Bank Reconciliation?
Bank reconciliation is the process of comparing your internal financial records to your bank statement to make sure they match. Every transaction in your books — deposits, withdrawals, payments, fees — should correspond to a transaction on your bank statement.
When they match, your books are reconciled. When they don't, you have a discrepancy that needs to be investigated.
Why Discrepancies Happen
Common causes of reconciliation differences include:
- Outstanding checks — checks you've written that haven't cleared yet
- Deposits in transit — money you've recorded but the bank hasn't posted
- Bank fees — charges you forgot to record
- Duplicate entries — the same transaction recorded twice
- Errors — typos, transpositions, or wrong amounts
- Fraud — unauthorized transactions you didn't catch
How Often Should You Reconcile?
Monthly, at minimum. Many businesses reconcile weekly. The longer you wait, the harder it is to track down discrepancies and the more likely errors are to compound.
What Happens When You Skip It?
Skipping reconciliation means your books may show a balance that doesn't reflect reality. You might think you have more cash than you do, miss fraudulent charges, or file taxes based on inaccurate numbers.
In an audit, unreconciled books are a red flag.
Reconciliation in QuickBooks Online
QuickBooks Online makes reconciliation straightforward. You enter your bank statement's ending balance, then match transactions one by one. QBO flags anything that doesn't match and keeps a reconciliation history.
If you're not sure how to use QBO's reconciliation feature, our QuickBooks Online Support service can walk you through it — or handle it for you entirely as part of our monthly bookkeeping service.
Related Resources
- 7 Bookkeeping Mistakes Small Business Owners Make
- How to Set Up a Chart of Accounts for Your Small Business
- QuickBooks Cleanup: Fix Messy Books Step by Step
- The Balance Sheet Explained
- Our Bookkeeping Services
- Free QBO Health Check
- Contact Us
Need help keeping your books reconciled every month? The Gap ProAdvisors handles monthly bookkeeping for small businesses nationwide. Get started today.
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About the author
The Gap ProAdvisorsOwner & Lead Advisor — The Gap ProAdvisors
Angela is a Certified Bookkeeper, QuickBooks ProAdvisor, and IRS Registered Tax Return Preparer (PTIN) with over a decade of experience helping small businesses across Texas get their books right and keep more of what they earn. She founded The Gap ProAdvisors to make professional financial services accessible to every small business owner — no matter where they are.
