Reconciling your bank accounts (including credit card accounts) each month in QuickBooks is one of the easiest ways to confirm that your financial data is accurate. Yet, many business owners who do their own bookkeeping do not practice this. So, why is it a good idea to reconcile your bank accounts each month?
1. Validates Data Entry
Reconciling your accounts each month will help identify data entry errors. One error example includes missing transactions (transactions that appear on your bank statement, but were never entered in QuickBooks). Another includes incorrectly recorded transactions (i.e. transactions that were recorded in QuickBooks to the incorrect bank account or transactions that were entered with the incorrect amount).
2. Confirms Financial Statements Are Accurate
Reconciling your bank accounts each month confirms that all transactions that have been recorded on your bank statements have been entered into QuickBooks. This means that your financial statements accurately reflect sales and expense activities.
3. Accurate Tax Reporting
The financial data you enter into QuickBooks is what you use to prepare your annual tax return. If you have not been reconciling your bank statements on a regular basis, it is very likely that your financial statements are not accurate. This will lead to reporting incorrect figures on your tax return.