Every month, the ending balance in your accounting software should equal your bank statement's ending balance once you account for timing differences (a check that hasn't cleared, a deposit in transit). When they match, your books are reconciled and you can trust every report built on top of them.
Why it matters: an unreconciled book is an unreliable book. Duplicate charges, forgotten transactions, bank fees, and unauthorized withdrawals all surface during reconciliation. Every downstream report — your P&L, your balance sheet — is only as accurate as the reconciliation beneath it. This is why professional bookkeepers reconcile every account every month.
The discipline: reconciling monthly (not once a year at tax time) means errors get caught while they're small and while you still remember what a transaction was. It's the single habit that separates books you can make decisions from and books you can't.
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Part of the Tides Bookkeeping Glossary — and the complete guide to small business bookkeeping.