What Reconciling Means, and Why It Takes Time

The biggest job I have as a bookkeeper is reconciling.

I thought you might like to know more about it.

What do I mean by reconciling?

It is the process of making sure your records of transactions on a bank account match the bank statement.

Each time you write a cheque, use a debit card, or otherwise take money out of or pay money into a bank account, you keep a record of it. Reconciling means checking that your records match the bank's records of the same transactions.

It is more than the bank account

There are a lot more reconciliations in bookkeeping than the bank one. Here is my list.

• The list of outstanding customer invoices has to total the same amount as shows on your Balance Sheet.
• The list of outstanding supplier bills has to total the same amount as shows on your Balance Sheet.
• The VAT account after your VAT return should be zero if you use Standard Accounting. If you use Cash Accounting, the VAT account should reflect the VAT content of your outstanding Debtors and Creditors. This is usually checked at your Financial Year End.
• Also at Financial Year End, the Fixed Assets accounts are reconciled and checked.
• Credit card accounts are reconciled, the same as bank accounts.
• Any (Petty) cash accounts are reconciled.
• Any applicable Payroll Taxes accounts are reconciled: the payroll taxes due against the actual payments made. This is then also reconciled against your HMRC account.
• Any Net Wages accounts are reconciled: the payroll wages against the actual payments made.
• Any Loan Accounts are reconciled against the loan company's statements, making adjustments for interest charged.
• Creditors accounts are reconciled against the suppliers' statements.

There may be other reconciliations depending on your particular business model.

How I start

The first thing I do is sort out the paperwork.

Then I enter it all by type: invoices, bills, wages, cash receipts, credit card receipts and so on. That goes into whatever record you chose, whether accounting software, a spreadsheet or a manual ledger book.

Once it is entered, the reconciling begins. It usually highlights problem areas. These are then queried and resolved, which can be quite time consuming.

But lots of fun.

As always, keep it simple and... Flourish and Prosper

Lisa