Published On: Mon, Jul 27th, 2020

Always Reconcile Your Balance Sheet Accounts Monthly

When I am working with clients to improve their profitability, many times, I find their financial statements are not accurate. This issue is a real problem. Please let me explain.
I learned early in my career; if you reconcile the balance sheet monthly, your income statement has to be accurate.
When I worked in accounting, I always started a month-end closing by reconciling the company’s bank statement. I tied the bank balance into the cash account on the general ledger and booked any adjusting journal entries. Then next, I made sure that the accounts receivables trail balance agreed with the AR balance in the GL. If it did not balance, I reconciled the differences, then made the appropriate journal entries. I did that same process for every account on the balance sheet. I kept a general ledger analysis binder with the reconciliations of every account. The three-ring binder organized each account (cash, accounts receivable, prepaid insurance, etc.)

Always reconcile your Balance Sheet accounts monthly.
Before I issued the month-end financial package to management, I made sure that my balance sheet was 100% reconciled.
This process is extremely important to the accuracy of the income statement. Many controllers of small to medium-sized companies are lazy and do not reconcile their balance sheet accounts monthly.
Recently, I reviewed my client’s balance sheet with the controller. I asked him to show me the bank account reconciliation. I wanted to confirm that the bank statement reconciliation agreed with the GL cash balance. At the time, he did not have the cash reconciled, so I asked him to do it immediately. When he finally finished the analysis, there were adjusting journal entries required with more than $50,000 in adjustments to the income statement. Unfortunately, most of the changes were not good ones, meaning they decreased the company’s profits. Next, I reviewed the accounts receivable aged trial balance to the AR balance on the balance sheet. There was an unreconciled difference that needed he needed to resolve and the appropriate adjustments made. We ended up going through the same process with every balance sheet account, both the assets and liabilities.

My client in this article is a $25 million company with 75 employees. This problem could happen to any company, not just small businesses!
I know that most people find accounting to be boring. But if you want your monthly financial statements to be accurate, there is only one way to do it. The controller must reconcile every balance sheet account monthly, and adjusting entries must be booked. This process is especially true at year-end. If your balance sheet general ledger accounts are not properly analyzed, it causes a few problems. Namely, your year-end balance sheet, income statement, and tax returns are all going to be wrong.
If your controller is not reconciling your balance sheet accounts monthly, then you have the wrong controller.
Reconcile all the balance sheet accounts is a must!

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My name is Robert Curry, and I am an Author, CEO Coach, Keynote Speaker, and Turnaround Specialist. Over the past 20 years, I have worked with more than 70 companies taking their businesses from Loses to Profits.

Please click on the links below to read my other articles about business like Always Reconcile Your Bank Account Sheets Monthly.

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I have recently published two books about turnarounds: “From Red to Black – A Business Turnaround” and “The Turnaround.” Both books are true stories about turnarounds of real companies that I have turned around during my career. In both books, I have shared all my Profit Improvement Recommendations (“PIR’s”). PIR’s helped to grow sales, reduce expenses, improve cash flow, and most importantly, strengthen the management teams.

If the information in this article Always Reconcile Your Bank Account Sheets Monthly helps you, your family or a business associate, please email me at [email protected] and share with me the story.

If you would like to purchase either or both books autographed by the author, please click on the following link: Red to Black books.

About the Author

- Robert Curry is an author, seasoned business coach, and successful turnaround specialist. Earlier in his career, he served as President and CEO of three different companies, the largest with annual sales of more than $1 billion dollars - all which experienced successful turnarounds under his management. In the late 1990s, he started his turnaround consulting firm, and for the past twenty years, he has turned around more than seventy distressed companies in many different industries helping each to establish a strong management team and become profitable. He has published two books: "From Red to Black" and "The Turnaround." He resides in Fort Lauderdale, Florida, with his wife, Esther.

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