Bank reconciliation: the one check that catches almost every mistake
When the bank and the books say the same thing, the books are right. Here is how to get there in ten minutes a week.
Bank reconciliation sounds like something an accountant does in December. In reality it is the only check that proves your books are correct.
What reconciliation is
Every transaction in the bank must have a counterpart in the books: an invoice you paid, a customer payment, a salary, a fee. When every bank transaction is matched and the balance in the books equals the balance in the bank, you are reconciled.
What it catches
- Invoices you have booked but never paid (or paid twice).
- Customer payments that came in without the invoice being closed, so you don't chase a customer who has paid.
- Subscriptions and fees you had forgotten.
- Private spending that slipped onto the company card.
How to do it manually
- Download the week's bank transactions.
- Go through them one by one and find the counterpart in the books.
- Anything without a counterpart is either a missing receipt or an error. Fix it now.
- Compare the balance. If it matches, you are done.
Ten minutes a week. Two hours a year if you wait until December, plus everything you can no longer remember.
How LegaSum does it
With a bank connection LegaSum fetches the transactions itself and matches them against invoices, receipts and payroll. What matches is posted. What doesn't becomes one question: "This payment of DKK 1,240 to Bauhaus has no receipt; was it business or private?" You answer, and the entry falls into place. The nightly review writes down whether the bank and the books agree, every night, not every December.