Bank Account Reconciliation with Profit and Loss Documents

Bank account reconciliation is a relatively straightforward accounting practice that many small business owners neglect to their businesses' detriment. When you go over bank, checking account, and credit card statements regularly, you know if you're using your bookkeeping software correctly. You can verify your profit and loss statement, get more information from expense tracking, understand your cash flow better, improve your receipt filing, ensure you have the needed documentation to deduct expenses, and generally organize your data better.

Although reconciliation creates more bookkeeping work, it is more than worth that investment in terms of the extra value it can generate by helping you fix bookkeeping errors, increase dedications, make tax preparation easier, and make accounting documents more effective. Bank account reconciliation means getting your aggregated transaction records each month, which typically include checking account bank statements and a credit card statement, going through them, and making sure you have the right documents and documentation of each transaction. If you do a lot of business in cash, such as with a cash register, you should also include the books you use to track it in this process so you can check your current cash balance against what your books suggest it should be. Generally, there is a best step-by-step process for reconciling your receipts, account statements, and accounting data.

First, you need to identify any pending income and expenses, such as deposits in transit and checks you may have written that haven't been cashed. This allows you to keep track of your actual financial situation compared to the balance reflected in bank accounts. The more complex your methods for paying for things and getting paid, the more important it is to be thorough with this preparation step so that you don't accidently make changes that you think are corrections because you forgot about a Paypal payment that is pending deposit or something.

Once you have all this information along with your receipts and maybe a printout from your bookkeeping software including an itemized profit and loss statement, the task becomes relatively grueling and detail-intensive. A bookkeeping expert might be better for this part if you are very busy as the head of the business. But the closer you can keep yourself to your accounting info, the better-informed you'll be about potential problems including employee dishonesty. You just go through every debit and credit on your checking account and credit card statement and be sure you have receipts for everything, check that the amount and date are correct, that it is recorded in your accounting software, and that you haven't missed anything. This is when you catch any mistakes in filing if your software is automated, and is the best way to prevent small purchases from falling through the cracks.

After performing account reconciliation each month, filing receipts will be easier and the decisions you base on the more accurate profit and loss statement will be more effective. Accounting information is essential to run a business, and reconciliation is one of the best ways to guarantee the quality of that info.


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