Why Bank Reconciliations Are Non-Negotiable in QuickBooks & Xero

Q: How often should I reconcile?

Monthly at minimum. High-volume accounts weekly. Never close a month without a completed reconciliation.

If your accounts aren’t reconciled, your numbers are guesses. Lenders, investors, and the IRS won’t accept guesses. Serious owners reconcile monthly, fix discrepancies, and lock periods. Here’s the standard.

Want this handled fast? Book a Bookkeeping Health Check. We reconcile, clear exceptions, and hand you a monthly close checklist. Or schedule a consult.

Summary — Jump to a Section

Why Reconciliation Matters
What “True Reconciliation” Means
How to Reconcile in QuickBooks & Xero
Red Flags to Fix Immediately
Stripe/Square/PayPal: The Clearing Account Trap
Stop Using “Reconciliation Adjustments” as a Crutch
Your Monthly Close Checklist
When to Use a Bookkeeping Health Check
FAQs

Why Reconciliation Matters

Cash is the control account: If cash is wrong, everything downstream is suspect.
IRS & lenders look here first: They expect your GL to tie to statements—precisely.
Decisions rely on it: Hiring, pricing, and financing choices fail when the cash picture is false.

What “True Reconciliation” Means

Reconciliation isn’t clicking “finish.” It’s proving that your GL balance equals the bank balance on the statement date—and explaining any outstanding items with source documents.

Element	Standard
Ending balance	Matches the statement exactly on the same date.
Outstanding items	Legitimate, recent checks/deposits with support. No stale items.
Clearing accounts	Zero or near-zero after monthly close. No orphan balances.
Adjustments	Documented, rare, and traceable. No “plug” entries.

How to Reconcile in QuickBooks & Xero

QuickBooks

Open Accounting → Reconcile, select the account, enter statement end date and balance.
Tick transactions that appear on the statement; investigate anything unmatched.
Use Reconciliation Discrepancy & Audit Log to spot edits after prior closes.
When difference = 0.00, finish and lock the period (Close the Books with password).

Xero

Go to the bank account, use the Reconcile tab; match statement lines to GL transactions.
Resolve items in “Unreconciled.” No line should linger month after month.
Run Bank Reconciliation Summary to confirm no unexplained differences.
Publish reports and lock prior periods after month-end.

Red Flags to Fix Immediately

Uncleared items > 60 days: Likely duplicates, wrong dates, or entries that never happened.
Negative balances: In cash, undeposited funds, or merchant clearing. These are credibility killers.
Transfers on one side only: Must appear in both accounts on the same date/amount.
Statement ≠ GL on same date: No “close enough.” Find the difference and correct it.

If you see any of these, don’t file taxes yet. Clean first. It’s cheaper than amending later.

Stripe, Square, PayPal: The Clearing Account Trap

Merchant processors bundle fees, chargebacks, and payouts. If you post deposits as “sales,” your revenue won’t match cash.

Set up a merchant clearing account: post gross sales, fees, chargebacks; the net equals bank deposits.
Reconcile the clearing account monthly—its balance should be small and temporary.
Attach processor statements to the reconciliation entry for a complete audit trail.

Stop Using “Reconciliation Adjustments” as a Crutch

Adjustments hide real errors. They also break trust with lenders and the IRS. Use them only when you can document a legitimate bank error or immaterial rounding difference.

Investigate differences before adjusting.
Reverse old “plugs” and correct the root cause (duplicate imports, wrong dates, missing entries).
Document every adjustment with a memo and attachment.

Your Monthly Close Checklist

Bank & Cards

Reconcile all bank and credit card accounts to $0 difference.
Clear old outstanding items; re-date or delete true duplicates.
Verify merchant clearing nets: Sales − Fees − Chargebacks = Deposits.

Controls & Lock

Run exception reports (uncategorized, negative balances, suspense).
Review inter-account transfers for both sides and dates.
Lock the period after close to prevent drift.

Want a done-for-you close flow? Our Bookkeeping Health Check installs a simple monthly routine your team can run consistently.

When to Use a Bookkeeping Health Check

Use it when you inherit messy books, see unreconciled items piling up, or before tax season and financing. We reconcile, clear stale entries, fix merchant flows, and document a monthly close you can trust.

Move from confusion to clarity: Bookkeeping Health Check or schedule a consultation.

FAQs

How often should I reconcile?

Monthly at minimum. High-volume accounts should reconcile weekly. Never close a month without a completed reconciliation.

Can bank feeds replace reconciliation?

No. Feeds speed data entry; they don’t prove accuracy. Reconciliation proves your GL equals the bank—exactly.

What if I have months of unreconciled accounts?

Backfill sequentially. Start with the oldest open month, reconcile forward, and clear stale items with documentation—not plugs.

What about petty cash or secondary accounts?

Reconcile every account that touches cash: petty cash, PayPal, merchant clearing, and credit cards. If money flows through it, reconcile it.

Can Polaris do this remotely?

Yes. We work nationwide in QuickBooks and Xero with secure access. You get a written summary and a close checklist.

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