Why Do I Need To Reconcile Accounts For My Month End Close Process?



If you run or operate a small business, it is  your sole responsibility to be financially healthy to operate.

To do that, certain bookkeeping and accounting activities must be performed – especially at month end.

From employee payroll, budgets, and expenses – your dollars in spending need to match what is in your books.

Your day may be uncontrollable with customers, orders, sales, and services needing your attention. Often times, business owners leave the books for “when they have time” or to someone they trust – usually a family member or dear friend.

Where this may work for you, you should be aware that errors do happen and when these errors occur, finding out months later can be a tricky web of columns, debits, and credits to unravel.

The last thing you need is to hire an accountant or CPA firm to “fix your books” and absorb the high dollar per hour cost.

How do you avoid this from happening?

When your business needs to document or verify account balances, this is referred to as reconcile accounting.

Reconcile accounting is figuring out how much money is sitting in your account. Sounds easy, right?

However, to accomplish this, you must keep track of records of every transaction that transpires. Depending on whether you run a cash basis or if you run an accounts receivable business, you are going to need some sort of documentation system.

You will need an invoicing system that matches with contracts or service agreements to reconcile and total your balances each month.

If you miss a step, this can alter the growth of your business for many different reasons.


The Magic of Reconciling Accounts At Month End In 8 Steps

In order to do this yourself, this is a general guideline that you can follow to assure you or your in-house bookkeeper is getting the job done correctly.

We implement this same strategy for our clients when we manage their books.


Step 1: Obtain a copy of the statement for the account you want to reconcile. Often this is a bank or credit card statement that you get in the mail or you may have opted for a “paperless” statement. If so, your bookkeepers should have the log in information to retrieve that for you. 

Step 2: Find last month’s ending balance. This is usually the starter balance on your statement and appears in most accounting software at the beginning of your statement.

Step 3: Enter the ending balance

Step 4: Open your reconciliation program. Quickbooks usually has a feature like this if you use their desktop or cloud accounting software. Mark all entries like deposits, checks, etc. as “entered” in the program if they already appear there.

Step 5: If you see transactions on your statement that are not there, you can enter them in at this time.

Step 6: Look for any transactions in your accounting software that are not on your statement yet. This might be like uncleared checks or outstanding deposits, etc. The need to be legitimate entries and can be adjusted or removed if needed.

Step 7: It’s time to get to zero in your balance. Make sure your reconciled difference is equal to $0 in your accounting software. If not, you might have missing transactions or made errors in your entries. Don’t worry, just review your entries again.

Step 8: Once you have “zeroed” out your account, click “Reconcile” in your accounting software. Print the reconciliation report and file it along with your bank statement.


Reconciling your account is your testimony that these transactions are valid and belong in that account and not in some other account.  

This is also a good practice to get to know the inner workings of what goes in and out of your business. 

More importantly, you are testifying that you are running an honest and legitimate business and can keep you from any legal trouble.

Taking control of your finances is making good business decisions. Using outsourcing bookkeeping services like LUXA is a sound move to improve the financial outlook of any business.

With LUXA reconciling your accounts you can be assured that an experienced online bookkeeper is handling your books and this can improve your odds of profitability.

Additionally, we can custom design a program using your debits and credits to provide a viable solutions to keep your records accurate and become financially sound.

No matter what type of business you have, LUXA can partner with you as your outsource bookkeeper for your reconciling needs. Check out our pricing page to see what plan seems right for you. Have questions? We have an accountant ready to answer your no-obligation consultation. 


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