Why is Reconciling Bank and Credit Card Statements Important?


Just recently I posted a blog on the "Importance of the Bank Reconciliation".  As I continue to catch up a clients books where the bank/credit card reconciliations were not performed more reasons keep popping up where money gets left on the table.     By reconciling past transactions, that had HST (Harmonized Sales Tax), I found that some purchase transactions where HST was not recorded.     HST is an input tax credit system, so because these pertained to the credits, money is being left on the table and negatively affecting cash flow and money in the owners pocket.


Reconciling a bank or credit card statement simply means comparing your accounting records—accounts payable and accounts receivable—and matching them up to the corresponding transaction as listed on your statement. Simply put: what's in your accounting system versus what's in the bank.


From a high level, it is always a good practice and good internal control to periodically (monthly) compare what is in your accounting records to what is actually in the bank. If you don't have accurate information about the amount of money in your account you cannot make accurate financial choices.


Diving deeper, you want to make sure that you’re being charged the correct amount on things you pay for. Usually you can trust your suppliers and creditors to charge appropriately, but everyone can make a mistake. So by reconciling your bank statements, you’re making sure that you’re not overpaying for something because of a clerical error.



You also want to ensure that all the transactions are in your ledger. It’s easy to forget to enter an expense or a payment when you’re in a rush or if you’ve misplaced a receipt, so cross-checking against the account statement can be a good safety net for your own books. Doing so will ensure that you are getting paid—and paying people back—promptly. This, in turn, will help you keep other parts of your accounting in order


Your Numbers Guy is here to help!


Keep your reconciliations up to date.   With decades of experience in finance, supply chain, and process improvement I too have ventured into the world of small business and self-employment.   My ultimate goals are to offer my experience and skills to entrepreneurs/small business where you have access to a professional CPA at affordable rates.   At the basic level bookkeeping & accounting is available but the services we offer are much more than that.     


I would look forward to having a conversation with you.     Let's meet!

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