Do you know how much money is in your account? Do you have enough to cover your bills? Do you know how much you spend each month? To stay on top of your finances and to manage your money smartly, you need to regularly reconcile your bank account or “balance the books”.
What is a bank account reconciliation?
A bank reconciliation "allows individuals to compare their personal bank account records to the bank’s records of the individual’s account balance in order to uncover any possible inconsistencies". Simply put, it’s a way for you to check that the amount of money you think is in your bank account, matches the amount of money the bank says you have in your account.
Why is it important?
One of the key reasons is that it gives you unique insight into your financial habits, showing you exactly how much you are spending. This knowledge can be empowering as you can use it to better control your finances.
Another important reason is fraud. Whether it’s an unusual transaction, your bank didn’t record a deposit, there’s an unauthorised withdrawal or you’ve been doubled charged – when you reconcile regularly you can uncover problems early and take steps to correct the mistake.
How do you do it?
The tools you choose for the reconciliation are up to you, whether you prefer good old pen and paper, an excel spreadsheet or personal finance software. You can make it as formal or informal as you would like, as long as you review each transaction, comparing your records to the bank’s. Step 01: Make sure you have your latest monthly bank statement. Step 02: Get a register or ledger (electronic or paper) where you can keep a record of all the account deposits and withdrawals that you have made. The Balance gives you examples of how to include entries into your form or spreadsheet. Step 03: If this is your first reconciliation you won’t have an opening balance, but from your second month on, check that the previous balance on your records matches the opening balance on the statement. Step 04: Go through each deposit and ensure that your records and your statement correlate. Step 05: Go through each withdrawal and ensure that your records and your statement correlate. Step 06: Check both closing balances at the end of your reconciliation to ensure they match. There can sometimes be discrepancies if a payment or deposit was made at the end of a month, as this will only reflect in the next month’s statement. This isn’t usually cause for concern if you can account for these amounts. When you spend time reconciling your bank account it makes you slow down and really look at your finances, ultimately giving you more control of what you spend and – more importantly – where you can save.
At bsmart we want our members to save every day, this is why we have more than 10 000 retail partners nationwide, where you can pay using your bsmart card and earn cashback. If you want to learn more contact us for more information or click here to sign up directly through our website.
Disclaimer: bsmart is not a Financial Service Provider and we do not purport to provide financial advice to our members. We strongly recommend seeking advice and guidance from a registered financial advisor when making any financial decisions. The articles that appear on the bsmart website and bsmart blog are for educational purposes only, and are in no way meant to be taken in an advisory manner.