How Often Should Contractors Reconcile Their Books?
If you run a contracting business, there are probably a hundred things competing for your attention.
Bank reconciliations might not be at the top of your list.
But keeping your books reconciled is one of the simplest ways to make sure your financial information stays reliable.
So how often should you reconcile?
At minimum, your bank and credit card accounts should generally be reconciled monthly.
For businesses with higher transaction volumes or more complex activity, more frequent review may make sense.
The important thing is consistency.
What Does “Reconcile” Actually Mean?
A bank reconciliation is the process of comparing the transactions recorded in your accounting system with the transactions shown on your bank statement.
The goal is to make sure they agree.
You may uncover:
Missing transactions
Duplicate transactions
Incorrect amounts
Transactions recorded in the wrong account
Outstanding items
Timing differences
Other bookkeeping errors
It’s essentially a financial quality-control check.
Why Does This Matter for Contractors?
Contracting businesses can have a lot of financial activity happening at once.
You may have:
Customer payments
Material purchases
Payroll
Subcontractor payments
Fuel
Equipment expenses
Credit card purchases
Transfers between accounts
Loan payments
When those transactions aren’t regularly reconciled, it becomes much harder to know whether your books are accurate.
And if your books aren’t accurate, your reports aren’t as useful.
What Happens When You Fall Behind?
Imagine you haven’t reconciled your books for six months.
Now you notice your bank balance doesn’t match your accounting records.
You have to go back through months of transactions to figure out what happened.
Was something missed?
Was something entered twice?
Was an expense categorized incorrectly?
Was a transfer recorded properly?
The longer you wait, the harder the cleanup can become.
Monthly Reconciliation Creates a Better Routine
A monthly bookkeeping routine means you’re dealing with a manageable number of transactions rather than an enormous backlog.
It also means your financial statements can be reviewed regularly.
For contractors, that can provide much better visibility into:
Revenue
Expenses
Profitability
Accounts receivable
Accounts payable
Cash flow
What About Credit Cards?
Don’t forget your business credit cards.
Credit card accounts should also be reviewed and reconciled regularly.
This is especially important for businesses where employees or owners use cards for:
Fuel
Materials
Tools
Travel
Equipment
Meals
Other business expenses
The transaction may be legitimate, but it still needs to be recorded accurately and supported appropriately.
What Should You Do After Reconciling?
Reconciliation is not the end of the process.
Once your accounts are reconciled, take a few minutes to actually review the information.
Ask:
Does the balance make sense?
Are there unusual transactions?
Are expenses higher than expected?
Are customer payments coming in as expected?
Are there large purchases that need attention?
The numbers can tell you where to look.
Don’t Let “Current” Become “Accurate”
It’s possible for bookkeeping to be current but still contain errors.
That’s why reconciliation matters.
A bookkeeping system shouldn’t simply have transactions entered.
It should have processes that help ensure those transactions are recorded correctly.
What Should a Contractor’s Monthly Bookkeeping Routine Include?
A good monthly routine may include:
Reconcile bank accounts
Reconcile credit cards
Review accounts receivable
Review accounts payable
Review job costs
Review payroll-related transactions
Review expenses
Review financial statements
Investigate unusual transactions
Identify anything requiring follow-up
The exact process will depend on your business.
But the principle is simple:
Don’t wait until year-end to find out what happened all year.
Make Your Books Work for You
Bookkeeping should give you confidence in your numbers.
When your accounts are reconciled consistently and your financial reports are reviewed regularly, you’re in a much better position to make informed decisions.
And you don’t have to spend your evenings figuring it all out yourself.
Bricked Bookkeeping helps contractors and trades businesses create organized, reliable bookkeeping systems so they can spend less time dealing with their books and more time running their businesses.
Start With Your Monthly Checklist
Download the free Contractor’s Monthly Bookkeeping Checklist to create a simple monthly bookkeeping routine.
Or book a free Contractor Business Call to talk about your current bookkeeping process.
You know the work. We help you know the numbers.