What Is Reconciliation in Accounting and Why It Matters
In the world of small business bookkeeping, reconciliation is more than just a financial task-it’s your safety net. Reconciliation ensures that the numbers in your accounting system match the real-world numbers in your bank statements, credit card accounts, and other financial documents. Without this vital step, you risk inaccurate books, missed payments, or even fraud slipping through unnoticed.
Download Our Free Brochure →Whether you’re a solopreneur or managing multiple employees, reconciliation helps keep your financial records clean, consistent, and compliant.
Real-World Example: The Importance of Monthly Reconciliation
Let’s say you recorded a $1,500 payment from a client on March 15th, but your bank only shows a deposit of $1,000. If you don’t reconcile that month, this mismatch might go unnoticed-causing issues with cash flow tracking, accounts receivable, or even your taxes.
By reconciling monthly, you’ll catch these issues early, avoiding long-term confusion and costly errors.
What Small Businesses Need to Reconcile
Most businesses should regularly reconcile the following:
- Bank accounts
- Credit card statements
- Loan balances
- Payroll records
- Accounts receivable and payable
Some bookkeeping platforms (like QuickBooks) offer built-in reconciliation tools, but the accuracy still depends on keeping your entries updated and organized.
State-Level Tax Reference
In many states, inaccurate or unreconciled financial records can lead to late or incorrect sales tax filings, especially in states like California, Texas, and Florida where sales tax audits are common. A missing entry or unbalanced ledger could trigger red flags during a tax review.
Behind on your reconciliations?
Remote Books Online can handle your monthly bookkeeping and reconciliations with precision-so you can stay focused on running your business.
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FAQs
What is reconciliation in bookkeeping?
It’s the process of matching your records with actual financial documents to ensure accuracy.
How often should small businesses reconcile accounts?
Ideally, monthly. More frequent reconciliation may be needed for high-volume businesses.
What happens if I skip reconciliation?
You risk errors, overdrawn accounts, inaccurate reporting, and missed fraud indicators.
Do I need software to reconcile?
It helps, but software alone doesn’t catch everything. Expert review is still critical.
Can Remote Books Online do reconciliation for me?
Yes. Our expert bookkeepers handle reconciliation and all monthly bookkeeping tasks.
Don’t let unreconciled accounts create chaos at year-end.
