Before I jump into the nitty-gritty of bank reconciliation, I want to tell you that it’s helpful to think of reconciling your bank account like a game.
Your goal is to make sure all of the transactions that happened in your bank account are also shown in your bookkeeping software, like Xero or WaveApps.
In short, you want everything to match, or balance, like your bookkeeper or accountant might say.
Because expenses and income that don’t show up can’t be claimed, or in other words, can’t be used for deductions.
That would throw off your taxes and potentially force you to pay for more than you owe. Not okay.
To avoid this, we reconcile our bank accounts. We make sure that no transaction falls through the cracks. And if something does? We become the Sherlock Holmes of bank transactions. (I know, cheesy. I couldn’t help myself.)
If everything is connected — your bank account, PayPal, Etsy, invoice software, and bookkeeping software — why might a transaction not show up? Good question.
Here are a few common reasons that your bank balance might not match your bookkeeping software records.
Common Reasons for Inaccurate Bookkeeping Records
1. Tech isn’t perfect, so sometimes transactions don’t show up when your banking website is down.
2. You’re getting double transactions from Etsy.
3. You’re getting double transactions from PayPal.
4. You’re getting double transactions from the deposit from your invoice and the invoice software.
Now, if you haven’t been reconciling your bank account, what are you supposed to do now?
First thing’s first: every software has a different way of reconciling a bank account.
In WaveApps, for example, it’s called Verify. In Xero, it’s called “reconciling” and you simply push a button that says “OK”.
I recommend doing this reconciliation process once a month to keep your books up to date and organized. If you wait any longer, you risk losing track of receipt or forgetting what a specific expense was. You’ll also have a better chance of getting paid sooner if you’re able to catch what invoices are still outstanding.
If you’re not sure what to do to keep your bookkeeping organized on a regular basis, I recommend downloading this FREE checklist: Weekly Bookkeeping Checklist for Bosses. It’s perfect for the DIY business owner who wants to keep her business healthy and make the most of her money. Click here to download it.
All of the above, though, might make sense in theory, but I’m sure you’re still wondering how you actually do it.
That’s why, in the next couple of posts, I’m going to show you step-by-step tutorials of how to reconcile your bank accounts using Xero and WaveApps. 🙂
Have questions for now or want me to do a tutorial using your bookkeeping software? Leave them in the comments below!