How to Do Bank Reconciliation How to do Bookkeeping
This is why you’re doing bank rec, and there’s often controller vs cfo: 6 key differences to understand a straightforward explanation. Bank reconciliation is a way to double-check your bookkeeping. You do it by comparing your business accounts against your bank statements.
Accounting software
Bank reconciliation happens when you compare your record of sales and expenses against the what is the purpose of contra record your bank has. It’s how you verify your business accounting numbers. Whether you do it automatically or manually, you can get more in our guide on how to do bank reconciliation. It’s a good idea to use a dedicated bank account just for your business.
Download the guide on how to do bookkeeping
- There will be amounts that appear in one set of records but not the other.
- Accounting software speeds up bank reconciliation by pulling transaction data directly from your bank through a secure online connection.
- This includes things like bank fees, which you might not have accounted for yet.
- One of your payments may not have cleared yet, or maybe you paid using cash or a different account.
- You do it by comparing your business accounts against your bank statements.
- You need a list of transactions from the bank.
It sounds mind-numbing and it can be if you’re doing it manually with paper bank statements. But there are clever ways to lighten the load. Most banks will send your transaction data directly to online accounting software. Then you have both sets of records on the same screen and you can run through them really fast. Smart software like Xero will even suggest matches, so all you need to do is click OK. Learn about the eight core bookkeeping jobs, from data entry to reporting and tax prep.
Business books show something that’s not on your bank statement?
Both sets of records should agree with each other. Accounting software speeds up bank reconciliation by pulling transaction data directly from your bank through a secure online connection. That removes keystroke errors for a start. When you compare your record of transactions against your bank’s, you’re doing bank reconciliation. Your entries should match up with their records.
That way you know all the transactions on your bank statement are business related, and should appear in your business accounts. The longer you go without doing it, the longer it will take to catch up. It won’t just be that you have more transactions to do, it will take longer per transaction because you’ll have a harder time recalling the details. If a transaction isn’t showing in your business books, it could be from a keystroke error when you entered a transaction. Or it could be a transaction that you forgot to enter.
It’s also what is an overdraft fee and how do you avoid them good for detecting wrong payments or fraud. Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done. Access Xero features for 30 days, then decide which plan best suits your business. This might be in a logbook, on a spreadsheet, or in an accounting software package. Some accounting software will pull in bills and receipts with the help of data capture tools and extract the data automatically.
Schedule the time to do it every week or even every day. And set up a system that makes it quick and easy to grab the records you need. After you’ve checked all the deposits and withdrawals, your business bank balance should match the totals in your business accounts. This will be the starting point for your next reconciliation. Each entry should match a withdrawal on your bank statement.
