Reconciling Matters - What’s the Big Deal?
You might have heard your bookkeeper mention reconciling, or maybe even been asked to please keep up to date with your reconciling! It's a fundamental part of accounting and simply means that you are comparing two sets of internal records to check that everything is correct.
Why is reconciling important?
Reconciling your accounts in your accounting software is important for many reasons. Firstly, it allows a business to detect any mistakes and discover potential fraud. Reconciling on a regular basis also allows a business to have confidence that their financial information is correct and accurate. It also helps you when it comes time to submit your Business Activity Statement (BAS) and get ready for the end of the tax year.
How does reconciling work in Xero?
In Xero this is done by clicking into your bank account from the dashboard and using the reconcile tab. Statement lines from your bank will appear on the left and your recorded Xero transactions like bills will appear on the right.
The idea is to match these items accurately. It can be easy to 'match' items that your accounting software thinks are related to each other but are not actually a match, such as two bills that have the same value. Take your time when reconciling and make time to investigate things that don't seem right.
What if things don't match?
It's not uncommon to come across items that don't match or debits that have occurred that you're unaware of. If this happens, don't panic! Go back to your bank statements and find the line item, the description may give you a hint about what the debit or credit relates to.
Someones it can be a simple transaction that took place that looks unfamiliar. Talk to your team members as soon as possible and see if they have any knowledge that can help you. Most of the time it will simply be an expense that you weren't aware of but it's important to make sure that the transaction was legitimate and related to your business. And of course the quicker you investigate the better chance you have that it may 'jog' someones memory and help you resolve the mystery transaction.
Other Considerations
Keeping up to date with your reconciling allows you to match and correct things much easier. When reconciling is left unchecked for long periods it makes reconciling much harder because you and your team may have a tough time remembering what transactions took place and when.
Need a hand keeping your reconciling under control? Feel free to contact us today for a no obligations chat.
This information is intended to be general in nature and is not personal financial advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided having regard to your objectives, financial situation and needs.
