Reconciling QuickBooks is the number one most important bookkeeping task that you can perform. One of the rookie bookkeeping questions we regularly get is why the QuickBooks' bank balance doesn’t match the actual online bank balance. It’s because you are not reconciling your QuickBooks file. Below, I will explain why reconciling QuickBooks is so important.
Ensures All Transactions Are Entered
Reconciling all of your accounts is the only way you can be sure that all of the transactions that occurred actually got recorded in QuickBooks. You have to reconcile all of your accounts, not just your main bank account. Each month, you need to reconcile your bank accounts, credit cards, loans, lines of credit, and all liability accounts. Basically, any account that has a monthly statement can be reconciled.
Reconciling your QuickBooks file is the only way you can be sure that you have accounted for every transaction that occurred in a given time period.
Gives Stamp Of Approval To Reports
Reconciling your accounts is just the first step in the process. Just because you have reconciled an account doesn’t mean that you have properly coded every transaction.
Each month, we perform an internal bookkeeping review of every account after it has been closed. The first step is reconciling, to be sure that every transaction has been entered. The second step is reviewing the accounting coding, to make sure everything is in the right spot.
Reconciling and an internal review of your books will give you the stamp of approval! You are now looking at accurate financial reports.
Allows Critical Business Pivots
If you have the confidence that you are looking at accurate financial reports, then you will be more confident in your decisions. The ability to make assertive decisions is critical to your success.
Accurate financial reports that are delivered in a timely and consistent manner are a weapon. You should have a custom set of reports for your business that you can use to make decisions. Whether you want these reports daily, weekly, or monthly depends on you; just make sure that you hold your bookkeeper accountable to your deadline. These reports will give you the ability to quickly assess your business' financial situation; knowing your business allows you to make key decisions, to pivot when necessary, and to keep your business on track.
Enables You To Predict Future Of Business
Reconciling QuickBooks also gives you the ability to predict the future of your business. Business owners always look at last month’s (or last quarter’s) profit and loss. While it is important to look at the past performance of your business, it is equally important to analyze the past and use it to predict the future.
Creating a financial forecast for your business every month is an incredibly powerful business tool. Take your actual financial performance and compare it to your expectations (also known as a budget versus actual comparison). Look for any major variances and use this information to create a logical prediction for your future financial performance. Blend your past performance with your knowledge of what is happening in your business. Are you rolling out any new products or services? Do you have a lot of pending proposals that you expect to get accepted?
Create a financial forecast at the end of every month for the next two to three months, then compare your projection to what actually happened. If you'd like, feel free to share your results in an e-mail with me, firstname.lastname@example.org, and we can review them together. A financial forecast is one of the best tools you can use to keep your business on track moving toward your desired outcomes.
Do you reconcile QuickBooks every month and use your bookkeeping as a growth tool?