What does it mean to reconcile my accounts?
Reconciling your accounts means comparing two sets of records to make sure they match. The most common version is bank reconciliation, where you check what your accounting software shows against what your bank statement shows for the same period.
The process works like this. You pull up your bank statement for the month. Then you open that same account in QuickBooks or whatever software you use. You go through each transaction, confirming that every deposit and withdrawal in one place appears in the other. Most accounting software has a reconciliation mode that lets you check off transactions as you match them.
When everything lines up, you know your books reflect what actually happened in your bank account. When something doesn’t match, you’ve found a problem that needs attention.
The discrepancies you’ll typically find include transactions recorded twice, transactions missed entirely, amounts entered incorrectly, and bank fees or interest you forgot to record. Outstanding checks and deposits in transit are normal. A check you mailed last week might not clear until next month. That’s not an error. You note it and watch for it in the next reconciliation. But a charge you don’t recognize? That needs investigation right away.
Reconciliation should happen monthly at minimum, ideally within a few days of the statement closing. Some small business bookkeepers reconcile weekly for their clients, which catches problems faster. Waiting until year-end to reconcile means sorting through twelve months of potential issues at once. Small mistakes compound over time and become much harder to trace.
You should reconcile every account that has two sources of truth. Bank accounts, credit cards, loans, lines of credit. Each one has a statement from the financial institution and a corresponding record in your books. If those two don’t match, something is wrong somewhere.
Reconciled accounts are the foundation of accurate financial reporting. If your bank account doesn’t match your statement, your profit and loss report and your balance sheet are both suspect. You can’t trust numbers that don’t tie back to reality.
For small business owners, reconciliation is often where hidden problems surface. That subscription you canceled three months ago but is still charging you. The vendor payment that processed twice. The customer deposit that got applied to the wrong invoice. These issues are easy to miss in the daily rush but show up clearly when you sit down to reconcile.
Part of monthly bookkeeping is making sure reconciliation happens consistently. It’s not glamorous work, but it’s what separates books you can trust from books that might be right or might not. Every financial decision you make depends on the accuracy of your records, and reconciliation is how you verify that accuracy.
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More Questions
I'm months behind on my bookkeeping. Where do I start?
Start by gathering all your bank and credit card statements for the missing months. Check for urgent deadlines like quarterly taxes or pending loan applications, then work through reconciliation one month at a time starting with the oldest.
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Cleaning up messy books typically costs $500 to $3,000 for most small businesses. The actual price depends on how far behind you are, transaction volume, and whether documentation still exists.
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Seven years is the safe default for most business records. IRS requirements vary from three to seven years depending on the situation, and some documents like formation papers should be kept permanently.
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Most small businesses do fine with cash basis because it's simpler and matches what you see in your bank account. Accrual makes more sense when you need an accurate picture of profitability across longer billing cycles or carry significant inventory.
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Count weekly, track waste daily, and compare what you should have used against what you actually used. The gap between those two numbers tells you where your food cost is leaking.
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Almost everything you spend to run the restaurant is deductible. Food costs, labor, rent, equipment, supplies, marketing, even the music license. The key is tracking it properly and categorizing it correctly.
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