What is “Balance Sheet Reconciliation” (And Why It Matters)

One of the most important, yet often overlooked, aspects of bookkeeping for a small business is reconciling your accounts. Whether it’s your business bank accounts, credit cards, or your balance sheet, it’s a task that doesn’t often end up on your to-do list. 

But while you’re familiar with bank (and credit) account reconciliation, there’s one you’re not nearly as familiar with: balance sheet reconciliation.

What is Balance Sheet Reconciliation?

Balance sheet reconciliation is the systematic process of comparing balance sheet account balances against supporting documentation and external sources (essentially, where the information was originally pulled from).

Reconciling your balance sheet often involves matching your general ledger figure to your statements from your business bank account, subsidiary records, and third-party confirmations like Stripe, CRMs, etc. It works to ensure that every balance sheet line item is accurate, complete, and properly supported.

And accuracy in your bookkeeping is extremely important for your business—and for the IRS.

How Does Balance Sheet Reconciliation Work?

When you’re doing a balance sheet reconciliation for your small business, start by identifying discrepancies between recorded balances and the supporting documentation (your accounts). You’ll want to do this monthly, potentially even bi-weekly if you have a lot of transactions.

Once you’ve identified the discrepancies, look through your accounts and documentation to find why there’s a discrepancy. Once you find the reason, make an adjustment to correct the errors or omissions.

Always keep a record of your reconciliation changes, too. This will help if something doesn’t quite add up in the future!

Why Reconciling Your Balance Sheet Matters (and Its Impact on Financial Accuracy)

Unlike other financial statements in your business, your balance sheet never stops growing—every day, every transaction, it continues to expand. While it provides timely insight into your finances, it also creates a lot of opportunities for error.

While the benefits of reconciling your balance sheet are nearly endless, here are some of the main reasons it’s so important:

• Improved financial accuracy, catches errors before they compound over reporting periods, ensures compliance with accounting standards, and provides clean, reliable data for decision making and tax accuracy (like how much of your income you should be setting aside for your taxes).
• Risk management detects fraud or unauthorized transactions early, reduces the risk of audit findings and regulatory penalties.
• Operational advantages like streamlining your month-end and year-end closing processes, improving cash flow management through accurate cash position tracking, and better planning and forecasting.

When to Outsource Your Bookkeeping and Your Account Reconciliations

Reconciling your accounts is one of the best ways to keep your bookkeeping accurate—and one of the best bookkeeping habits to have as a small business owner.

But once the time you’re trying to spend keeping up with your bookkeeping is cutting into your time with your clients, friends, family, or simply your own time, consider outsourcing to a bookkeeper!

Bookkeepers help you keep your accounts organized and up to date so you can spend time doing everything else on your to-do list. Wondering if it’s the right time to outsource your bookkeeping? Book a call here!