Reconcile, Reconcile, Reconcile

Bookkeeping is the continually process of checking and reconciling the data to ensure it is fair and correct so that you can rely on any reports produced from the accounting system.

If you have not heard the old adage about bookkeeping, it’s reconcile, reconcile and reconcile. Reconciling the accounts of a business is the process of comparing each account in the General Legder (control accounts) against outside information to ensure the records match. This may be your bank statement for banking accounts, creditor statements for your trade creditors, your sales receipts and subsidiary Sales Journal for your income reported etc etc. 

Putting aside the fact that this needs to be done in order to lodge any tax returns and remain compliant with your countries tax legislation - Reports derived from your system may be relied upon by your bank manager, investors or other interested parties. They need assurance that the information supplied is a fair and true representation of your business activities.

For micro or small business you still need to rely on the reports for business decision making - so it is in your favour to ensure that your accounts are in order. The quicker you uncover errors, improriety or changes in your trading (including downturns in sales) - the quicker you can implement corrective action.

Rolling Reconciliations

Different parts of your accounting system will be reconciled at different rates. We suggest reconciling bank accounts daily (or at least weekly for micro businesses) to alert you to any impropriety or errors early on. You may reconcile your sales and/or purchases journals each month, although an automated system will give you the ability to continually reconcile as work progresses.

Either way it makes good business sense to (at the very least) implement a rolling reconciliation schedule that suits your business needs such as the figure below. 

End of Period Flowchart

An example of an End of Period Flowchart below. Once you have reconciled all the subsidiary journals, prepared reports and submitted any statuory reporting such as business activity statements for GST/VAT you can close off the period and start again.