FAQ: What Is a Monthly Reconciliation?

A monthly reconciliation (also known as account reconciliation) is the process of comparing your business’s internal financial records—such as your general ledger or bookkeeping software—with external statements like bank, credit card, or loan statements to ensure they match. In short, it’s a monthly routine that verifies whether every transaction has been accurately recorded, categorized, and accounted for.

Why Monthly Reconciliation Matters

Reconciling your accounts isn’t just busywork—it’s a core compliance practice. Errors, omissions, or fraud can go unnoticed if you skip this step. Monthly reconciliation:

• Ensures your financial statements are accurate.

• Helps you catch bank errors, duplicate charges, or missing deposits.

• Supports compliance with IRS and state tax regulations (accurate records are required for audits)【IRS.gov】.

• Provides clarity for cash flow management, so you know exactly how much you can spend or save.

• Builds credibility with lenders, investors, and partners by showing disciplined financial oversight.
  

Without regular reconciliations, small mistakes compound over time, leading to costly corrections or compliance risks.

Related Questions Clients Often Ask

• Do I need to reconcile every account, or just my bank account?

• What’s the difference between account reconciliation and a bank statement review?

• How long should I keep reconciliation records?

• Can bookkeeping software automate reconciliations?

• What happens if my accounts don’t balance?
  

Actionable Tips for Monthly Reconciliation

If you’re ready to implement or improve your monthly routine, here are the steps:

1. Gather Documents

   • Bank statements

   • Credit card statements

   • Loan or line-of-credit statements

   • Internal ledgers or bookkeeping software reports
     

2. Compare Transactions

   • Match each deposit and withdrawal to your ledger.

   • Look for duplicates, missing entries, or mismatches.
     

3. Investigate Discrepancies

   • Errors might be timing issues (e.g., outstanding checks).

   • Flag and correct misposted transactions.
     

4. Adjust Records

   • Record bank fees, interest, or transactions missed in your books.

   • Correct categorization errors for clarity and compliance.
     

5. Review & Document

   • Save a copy of your reconciliations each month.

   • Use them to back up tax filings or provide evidence during an audit.
     

If you’re not sure how to set up a consistent reconciliation workflow, Development Theory has outlined practical bookkeeping solutions here: Bookkeeping & Payroll Services

Final Takeaway

Monthly reconciliation is more than a compliance checkbox—it’s a financial health check that protects your business from errors, fraud, and uncertainty. By building it into your monthly routine, you ensure accuracy, maintain compliance, and gain the confidence that your financial reports reflect reality.