What Is Reconciliation?
What is reconciliation? You hear this term a lot when you talk to accountants, but do you really understand what it means? Maybe you do, maybe you don’t. By understanding reconciliations, you will see why it is important to have this task completed on a regular basis.
We like to compare reconciliations to sorting and matching socks, it is all about finding a match. Every sock pulled out of your dryer has a matching partner making it a complete set. Reconciling your accounts is very similar. You are comparing statements with charges to make sure that everything matches and is coded in the correct categories.
There is always that one sock though… the one that you can’t seem to find its match. So, what do you do when you can’t find the match? Look in the dryer, look in every drawer, and under every cushion. It is the same when you are reconciling. If you can’t find a match, you start by looking in other accounts or other locations to see if they match or if missing links can be located. And guess what, sometimes it works! Sometimes you find the match. Then you can move on and continue the matching process.
But as we all know, there are times when you can’t find the matching sock. Sometimes that happens when reconciling too, you can’t find the match. That is when having an accounting team on your side is key, because it is time to get out your knitting needles and create a match. That’s right create a match. You can do this with a journal entry. The key is to know the right way to create the entry and to do that you need to make sure you have exhausted all your other options. By having an accounting team on your side, you know that the entries are going to be made correctly and accurately. That is another big benefit of outsourcing your accounting.
We hope that today you have a little better understanding of reconciliations and how they work. We know that accounting is a big part of any business, that is why at Devine Consulting we strive to provide the best and most personal accounting services to all our clients. So, avoid the mayhem of matching socks, and let Devine do your laundry.