Why Your Bank Balance Doesn't Always Match Your Books

Have you ever checked your business bank account, looked at the balance, and assumed that was how much money your business had available?

You're certainly not alone. Many small-business owners check their bank balances regularly, but there's an important difference between knowing what's in your bank account and knowing what your bookkeeping records actually show.

That's where bank reconciliation comes in.

What Is Bank Reconciliation?

Bank reconciliation is simply the process of comparing the transactions recorded in your bookkeeping system with those appearing on your bank statement.

The goal is to make sure the transactions are accounted for and to identify any differences that need attention.

For example, you might have written a check to a supplier that hasn't cleared the bank yet. Your bookkeeping records show the payment, but your bank balance hasn't changed.

Or perhaps the bank charged a monthly service fee that hasn't been entered into your books.

These are common reasons the two balances might not agree.

What Can Reconciliation Help You Find?

Regular reconciliation can help uncover several issues:

• Missing transactions. A deposit, payment, or bank fee may not have been recorded.

• Duplicate entries. A transaction may have accidentally been entered twice.

• Incorrect amounts. A payment might have been recorded for $450 when the actual amount was $540.

• Outstanding checks and deposits. Some transactions have been recorded in your books but haven't cleared the bank yet.

Not every difference means something is wrong. Sometimes it's simply a matter of timing. The important thing is understanding why the difference exists.

Why Should You Reconcile Every Month?

Think about how many transactions your business might have in a month.

Now imagine trying to sort through six months—or even a full year—of those transactions to figure out where something went wrong.

That's one reason I recommend reconciling business bank and credit card accounts every month.

When you stay current, discrepancies are generally easier to investigate, missing information is easier to track down, and your financial reports have a more reliable foundation.

And those reports are important. They help you understand your business's income, expenses, and financial activity throughout the year.

Your Bank Balance Isn't the Whole Picture

Your bank balance tells you how much money is currently in your account. It doesn't necessarily tell you how profitable your business is, what bills are still outstanding, or whether every transaction has been recorded correctly.

Keeping your books organized and reconciled helps you see beyond that single number.

Good bookkeeping isn't just about getting ready for tax time. It's about having useful financial information throughout the year.

A Little Work Each Month Can Save a Lot Later

Whether you're running a construction company, an HVAC business, a small manufacturing operation, or another local business, regular reconciliation is one of the basic habits that helps keep your financial records in order.

You don't have to wait until the end of the year to find out where things stand.

At JWS Bookkeeping, I help small businesses throughout Seguin, New Braunfels, and surrounding Central Texas communities keep their books organized, reconciled, and up to date.

Clear Numbers. Square Ledgers.

Learn more at jwsbookkeeping.com.