14 or so years ago, an enthusiastic 12th grade student walked into her small hometown bank in rural Michigan to open her first checking account. Can you feel the excitement?!
Well for me, there was A LOT of excitement actually! I was preparing to leave my little town behind for the slightly bigger town I’d be attending college in that fall and needed an ATM/debit card. Up till this point in life I had a savings account and cash stored in the very secret location of… the top of my closet.
The bank signed me up and besides a lollipop (Where do they even get these? Is there a special candy for banks store?), they also sent me home with a checkbook for my new account. I had watched my mother write in her checkbook my whole life and I had also taken a class in middle school that taught us how to balance a checkbook (A skill I was surprised to find out most of my peers never had been taught really), so thankfully, with a little refresher, I was ready to go. Responsible Checking Account Owner (or RCAO…ooh that’s catching!), here I come!
While RCAO hit a snag here or there with keeping up with her checkbook, the world of internet bank really gave her a leg up. I could check my bank balance anywhere, anytime…so much so that most of my peers didn’t even use checkbooks anymore (So much so that some jerkfaces might make fun of one RCAO for using her checkbook still…it’s fine, it’s fine).
With accessibility on my side, referencing my checkbook against my monthly bank statements became easier than ever. It wasn’t until I came to work for Kuberneo CPA that I found out this action even had a name (besides, “Oh crap how much money is actually in my bank account?”)…Reconciliation.
Reconciling your account (bank or credit card) simply means comparing what’s in your accounting system (QuickBooks, Your checkbook, etc.) verses what’s in the bank. A few reasons it’s important to do this:
- Ensure you have accurate information to make financial decisions
- Ensure you’re being charged the correct amount for things you’ve paid for
- Ensure detection of identity theft or fraud
- Ensure everything’s made it into your ledger and nothing has been missed
Obviously, this is important to me personally, but if you own a business, it’s even more important that your accounts are reconciled every month. The financial decisions you’re making will be based on what your accounting reports are saying, which get their information from your accounting system…don’t you want that system to have accurate information? (Psst- the answer is yes)
One last tip if you’re getting started: It wasn’t till the last six months that I have transitioned away from using a physical checkbook and now have an app I use on my phone, but I still reconcile my account with my statements every month. (Only now it’s even more likely to be accurate because it does the math for me!) RCAO over and out.