Reconciling bank accounts is critical to ensuring the accuracy of your company’s accounting records. The primary purpose of a bank reconciliation is to confirm that the transactions recorded in your bank statement match those shown in your accounting records.
Generally, bank accounts should be reconciled at least monthly. However, conducting weekly or daily reconciliations for accounts with a high volume of transactions can help uncover accounting errors and fraud quickly. Here’s a list of five common mistakes to avoid when reconciling bank accounts in QuickBooks® software:
1. Reconciling infrequently. When too much time elapses between reconciliations, it can complicate the process. Stale, undetected errors can create significant weaknesses in your financial records. It may also be harder to investigate discrepancies as memories fade regarding the specifics of unreconciled transactions.
2. Not reviewing every transaction. It can be tempting to skip smaller transactions to expedite the reconciliation process. Reconciling every transaction, however small, ensures the accuracy and integrity of your accounting records.
3. Relying exclusively on bank records. While QuickBooks allows users to import bank transactions, assuming every transaction is legitimate and accurate can be a mistake. For example, check payments issued to suppliers should match their invoices. Reconciling payments to source documents and bank records can uncover errors by financial institutions that processed the payments or alterations of the checks by the recipients, for higher amounts.
4. Routinely creating accounting entries to adjust for differences. Differences may arise despite your best efforts to reconcile transactions in QuickBooks with those shown on your bank statement. The software can create an entry to adjust for the difference. Use caution, as adjusting unreconciled balances can mask errors and fraud.
5. Not accounting for outstanding checks and deposits. Failure to keep track of checks and deposits that haven’t cleared or been posted to your account can complicate the reconciliation process. To avoid unreconciled items and the need to adjust for differences, gather unpaid and uncleared transactions before beginning a reconciliation and refer to them during the process.
Reconciling bank and credit card accounts can be time-consuming and tedious, especially if an account includes many transactions or your business operates many accounts. However, allowing accounts to be unreconciled can cause errors to multiply, impacting the accuracy of your financial records. Contact an Axley & Rode advisor for guidance on how to reconcile your accounts and how QuickBooks can help make the process more efficient.
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