While reviewing a QuickBooks file recently, I checked the monthly bank reconciliation, and noticed it wasn’t prepared. It turns out that my client was clicking everything in the register to check off the items as cleared, and didn’t actually make sure all his deposits and payments were recorded. Since the monthly bank reconciliation hadn’t been done, his tax returns would be totally wrong!
In this video, I show you exactly how to prepare a bank reconciliation in QuickBooks.
Monthly bank reconciliation is important for so many reasons, and accurate accounting data is just a start. Here are some more reasons:
- All valid deductions have been recorded, such as bank charges, automatic bill payments and debit card activity
- The bank has posted all your deposits to your account – sometimes deposits go missing!
- There aren’t any forged checks, bank errors, or fraudulent transfers made by someone who has gained access to your account
- Cash flow monitoring
Monitoring your cash flow:
To monitor your cash flow, you need to know that your accounting records are up to date, and a bank reconciliation is a way to make sure they are. Some businesses reconcile their bank accounts weekly or even daily, if they are operating with minimal cash on hand. At a minimum, you should reconcile your bank account every month.
Old items need to be researched:
It’s also important to uncover any old outstanding checks or deposits that need to be researched. You don’t want to have duplicate income or expenses incorrectly recorded in your records and on your tax returns.
Why doesn’t your book balance equal the bank statement?
A bank reconciliation identifies differences between your book balance and the bank balance, and are usually due to any of the following:
- Checks issued which have not cleared the bank
- Deposits you made at the end of the month that the bank didn’t post yet
- Unrecorded bank charges
- Interest income
- NSF Checks (rejected deposits, because the customer didn’t have enough funds in their account to cover the check)
- Errors – either you or the bank may have recorded a check or deposit incorrectly (or not at all)
Please feel free to reach out if you have any questions, I am on the web at www.ls-cpa.com, or call 516-532-4839.