During account reconciliation, you compare your credit card statements and bank statements with the ledgers in your books to make sure everything is accurate and matches with your reported operating expenses.
Just like balancing your checkbook, you should make sure that you reconcile these accounts frequently to ensure that they match up to your real-life business bank accounts.
What Is Account Reconciliation?
Account reconciliation is the process of comparing statements over a specific period of time. Reconciliation is performed by making sure that your bank and credit card statements match your operating account balances to the penny for the reporting period.
The purpose of account reconciliation is to ensure that:
- All bank transactions have been recorded,
- All accounting software transactions are recorded,
- All transaction amounts entered in your accounting software are correct.
If all three above are true, then an account and its transactions over the reporting period are considered to be reconciled. If there are discrepancies, then that means that there are likely errors somewhere within the recorded financial transactions that you will need to review and resolve.
An account that is not reconciled can’t be considered a reliable source of accurate financial reporting for a business. Unreconciled accounts, which are at risk of having significant errors, should never be used to make business decisions. To use your financial statements to make business decisions, you need to make sure that your accounts are reconciled first.
In fact, accountants and businesses follow the generally accepted accounting principles or GAAP standards. which requires business account reconciliation for financial statements preparation and reporting. While GAAP is only mandatory for publicly traded construction companies, it is strongly recommended for all businesses, even for smaller construction businesses.
When to Reconcile Your Operating Accounts
Reconciliation is not something that you should only do once or at tax time.
At Apparatus, reconciliation of your credit card and bank statements is part of the bookkeeping services that we complete monthly for all our clients. We recommend that businesses reconcile their operating accounts monthly to match their bank statements and credit card statements. This helps ensure that you always have a clear picture of the financial health of your construction business.
7 Benefits of Bank Statement, Credit Card, Operating Account Reconciliation
If you have not reconciled your construction company operating accounts lately or you do not do it on a regular basis, it is impossible to really know how much you are spending versus how much you make. When you reconcile your operating accounts with your business credit card and bank account statements, you will be able to do the following:
- Find missing transactions
- Identify incorrect transaction amounts
- Locate duplicate transactions
- Reveal fraudulent or erroneous charges
- Have better conversations with your accountant about tax deductions for your construction businesses
- Make tax preparation easier
- Know your construction company finances in real-time
Now that you understand the importance of bank reconciliations, the next step is to hire a Quickbooks-certified bookkeeper to assist you in organizing your finances.
The accounting professionals at Apparatus can assist you with all aspects of bookkeeping for construction companies, including categorizing transactions, account reconciliation, and financial statement preparation.
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