What is bank reconciliation?
When you compare your record of transactions against your bank’s, you’re doing bank reconciliation. Your entries should match up with their records.
Why does it matter?
Bank reconciliation helps you find and fix data entry mistakes or missed transactions. It’s also good for detecting wrong payments or fraud. As you run through the transactions, you can also assign them to the correct business account (if you haven’t already) and flag tax deductible expenses for when you file a return.
How to do bank reconciliation
Bank reconciliation isn’t complex. Many people open their business ledger on one screen and a bank statement for the same period, then cross-reference. If you can’t find a match for a transaction, you need to figure out why and make adjustments so that both records mirror each other.
Modern bank reconciliation
Accounting software speeds up bank reconciliation by pulling transaction data directly from your bank through a secure online connection. That removes keystroke errors for a start.
The software then presents the transactions on a screen, asking you to verify them and assign each one to an account. The fields are often pre-filled based on past transactions or exact matches to sales invoices, purchase bills, or bank rules that have been set up for speed and consistency. You just have to click to confirm what’s suggested.
You can still manually enter things like expenses that aren’t captured by the business bank account. And you can have the software retrieve transaction data from point-of-sale and invoicing systems, or receipt scanners.
Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the content provided.
How to do bookkeeping
Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done.
- How to do bookkeeping
Small businesses can do their own bookkeeping or outsource to professionals. We look at how to find a good balance.
- Setting up a chart of accounts
Stepping up to do the bookkeeping in a new business? You may have to set up the chart of accounts. Let’s look at how.
- How to do bookkeeping data entry
Data entry is the foundation of bookkeeping. Enter the numbers right and you’ll learn exactly how the business is doing.
- How to do bank reconciliation
Humans aren’t always perfect at punching numbers. Bank reconciliation is a way to do quality control on your books.
- How to manage accounts receivable
Many businesses issue invoices, and those invoices need to be tracked. Learn how to manage accounts receivable.
- How to manage accounts payable
Paying bills isn’t glamorous. But they’re debts and need to be dealt with. Let’s look at how to manage accounts payable.
- Creating monthly financial reports
There are dozens of financial reports that you could create. But there are some monthly mainstays that bookkeepers love.
- How to do payroll
If all you had to do was pay staff, it would be easy. But there’s more to it than that. Let’s look at how to do payroll.
- How to prepare tax returns
Tax returns can be hard for small business owners. There are deadlines to make, and rules to follow. Let’s take a look.
- Using bookkeeping software
Whether you do a lot of your own bookkeeping or outsource it all, software can help you save your time and budget.
- Using professional bookkeeping services
If you don’t have the time or confidence to take on bookkeeping, a professional can help. Let’s look at what they do.
Download the guide on how to do bookkeeping
Learn about the eight core bookkeeping jobs, from data entry to reporting and tax prep. Fill out the form to receive the guide as a PDF.