When you reconcile an account, you compare the beginning balance and transactions listed in your QuickBooks Online company file with your monthly bank or credit card statements to make sure they match.
Accountants call this reconciling, or balancing, your books. When you're finished, your books and bank agree with each other.
Reconciling is like balancing a checkbook, as you review your bank statement to make sure it matches the amounts you recorded in your check register.
This lets you know your available balance for the period and identify any discrepancies (such as unrecognized charges).
Reasons for monthly reconciliations:
Lets you know your books are correct
Enables your accountant to give you better advice
Makes tax time much easier for yourself
Lets you know if your customers are paying you
Lets you see if you're paying your own bills on time to avoid late fees and unhappy vendors
By reconciling your accounts monthly, you can:
Quickly spot income fluctuations and respond accordingly
Take quick, informed, and decisive action when you see financial opportunities or possible danger signs
Catch bank errors that cost you money, like a wrong total for a deposit with multiple checks
Help prevent possible fraud by employees, accounting professionals, or vendors