Reconciling bank and other account types is an important
step in the checks and balances that make up bookkeeping. This crucial step
allows you to see if there have been any transactions that were missed or may
have accidentally been duplicated, and can help you catch some common
bookkeeping mistakes.

While having accounting software is essential and makes
life easier, especially when you link your accounts, nothing is perfect. There
are times when the software may import transactions more than once, or there
can be issues where there is a gap in the information coming through the bank
feed. Some business owners create transfers when they’ve made a purchase, which
causes two issues. One is that your expenses aren’t being properly recorded –
an issue during tax time. And the second is that it normally ends up posting to
an account that doesn’t make sense – like Uncategorized Asset or Owner’s Pay
and Personal Expenses. Doing this messes up both your Balance Sheet and Profit
and Loss statements, and unfortunately you can’t just change a transfer to an
expense. The transfer must be deleted and a brand-new expense transaction
created in its place. If you create Transfers instead of purchases, reconciling
will show you that you’ve created this incorrectly as long as you’re taking a
look at the accounts you assigned when categorizing your transactions.

I’ve also seen some clients, instead of choosing an income or expense account to
post an expense to, select the bank account or credit card they used to pay for
the charge. This causes an issue in Quickbooks where it basically creates
another transaction to the same card when there wasn’t one. For example,
instead of paying Amazon $100 for Office Expenses with their American Express, they
select that they paid with their Amex, but under Category, they select that
same Amex account. This means it shows the American Express paying for itself
(this isn’t how it works). When you go to reconcile, it will show both a
withdrawal and a payment to the Amex account that doesn’t match the bank
statement. This one is an easier fix, where you can open up the expense, take
out the Amex from the Category, and select the right expense account.

Lastly, I’ve had clients who enter Expenses/Deposits when they spend or receive money
(yay!), but they say everything is an Uncategorized Expense or Income (aw!).
Posting every purchase to Uncategorized Expense means your Profit & Loss
doesn’t show the breakdown of where the company money is going – another tax
time issue. If left this way, it could mean missing out on tax deductions, or
spending a whole bunch of time researching everything for your CPA. If your CPA
has to do this work for you, you’ll likely be paying a premium to cover their
time. The moral of this story is to be careful when entering transactions, and
reconcile those accounts regularly!