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Why are reconciliations so important?

accounts reconciliation bookkeeping business accountant finance myob xero accounting software Jul 08, 2022

Most people are familiar with the word reconciliation, but not everyone knows exactly what it means. Reconciliation is a process where you compare two sets of records to check that they match. It usually involves comparing a bank statement with your own internal records, such as a cashbook or spreadsheet - or even better - your bookkeeping software.

The first thing that auditors and accountants look for is that your accounts have been reconciled. This means that each item on your Balance Sheet has been checked, and can be proved in some way. Some of your Balance Sheet accounts can be proved by external parties, such as bank statements, loans and invoices of assets purchased. Other things can be proved from within your systems. For example, if you use MYOB or Xero, then you can prove your Accounts Payable and Account Receivables by running and checking the reports on a regular basis.

It is recommended that your accounts are reconciled on a regular basis. This depends on the number of transactions that the business has, as to whether you reconcile weekly, monthly or quarterly. The more often it is done, the easier it is to do.

Reconciliation is the way to keep your system clean and useful not just for you and your business, but also for people who look at your books in a professional manner. It can take a certain amount of time and a certain amount of effort, but it is well worth it. After all, wouldn't you want your Balance when audited or taxed to be correct? That is why reconciliation should be an ongoing part of your business procedures.

 

If you require help with keeping your books up to date, please reach out and book a "first meeting" appointment, so that we can see how we can help.

Schedule an appointment with us now! 

This blog is intended to provide general information only and should not be construed as legal or specific tax advice for your circumstances. It is always best to get advice from a professional before you rely on anything you read on the internet.

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