I’ve been working with QuickBooks for well over 2 decades and I’m always amazed with the number of businesses that do not take the time to reconcile their accounts in QuickBooks before they produce financial statements or file their taxes. I’m here to encourage you to change your ways immediately!
Here are the Top 7 Reasons You Need to Reconcile in QuickBooks:
- We are all human and mistakes happen. With the addition of the bank and credit card downloads, people believe that will automatically reconcile their accounts and that is not true! I can not tell you how many times I’ve seen these bank downloads cause issues with duplication or missing information. Reconciling on a monthly basis helps ensure that what is input into QuickBooks matches what is happening in the banking, loan and credit card accounts.
- Processes are important and just like you should invoice your customers and pay your bills on a regular basis, so should you reconcile your accounts. This ensures things are tidy and easily trackable in QuickBooks.
- Reconciling your loan accounts should include any automobile loans, line of credit loans or any other type of loan you may have through the business. This will help ensure the proper coding of principal and interest breakdowns on the payments.
- Reconciling your credit cards helps ensure that expenses are being entered (and hopefully coded correctly) and allow you to monitor what your outstanding balance is at any given time. Only inputting what you’ve paid doesn’t allow your financials to be accurate as they are missing the charges you’ve not yet paid for but have incurred and hence the credit card liability is incorrect on your Balance Sheet.
- Reconciling your banking accounts (ie checking and savings) allows you to ensure that the ins and outs of the accounts are complete. While reconciling doesn’t ensure that the transactions are coded to the right income or expense account, the dollar values for the bank accounts are being verified. This is important as if you are audited, they will be looking at your reconciliations and verifying what you are showing for income is representative with what your bank account statements are showing.
- How can you possibly rely on financial statements if you haven’t done your due diligence to ensure that everything is correct and that you are getting the “full picture”? Reconciling is the first step in this process followed up by a thorough review of the line items prior to sharing it with your team.
- Tax preparers rely on good financials to be complete and accurate to file tax returns. If you haven’t reconciled, there is no way you can be confident the information you are providing is accurate.Remember, reconciling is only part of the overall process you should go through when preparing financial and tax returns. It is simply your starting place.
These are 7 good reasons why you should incorporate reconciling in your monthly business processes. Remember, the first month is always the trickiest and it will get easier. Here are some great videos to help you if you get stuck!
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