The simplest way to begin reconciling a bank account is to do so from the beginning when the account is first opened. However, you may have an account that has been open for a while and have now decided that it is time to reconcile it.

Lets start with the basic meaning of the word reconcile. According to the Free Online Dictionary, it means to become compatible or consistent. In terms of balancing your chequebook or bank account, this is a bit vague for most people. Basically the intent behind reconciling a bank account is to balance your understanding of what amount of money is available in your account with the bank’s at a given point in time. This is why I like to use the last day of the month. Personally I like to use the phrase balance as opposed to reconcile as it is one most people can relate to better.

If you have been keeping track of your monetary transactions, you are able to easily see which of those transactions have cleared your bank account and which remain outstanding. If you have also been keeping a paper or spreadsheet ledger of your transactions, you will be able to zero in on a specific balance on a specific date.

Find the date and balance in your ledger that corresponds to the date on the bank statement you are balancing to. If you have standard bank charges that appear at a given time each month, remember to leave a line to enter those in your ledger, particularly if you are using a paper method. One way I was able to ensure monthly charges were clearly assigned to a particular month, was by assigning a new page in a paper ledger to each month. If you are using a spreadsheet for a ledger, simply insert a row.

Ok, let’s get balancing. You are going to be matching your records of the following to those that appear on your bank statement.

Deposits Made

On the bank statement, match all deposits that you have made during the month with those listed in your ledger. If there are deposits that you have not recorded in your ledger, enter them at this point. If there are deposits that are not showing on your bank statement, make a note of those.

Checks Written

Match the cheques listed in your ledger with those listed on the bank statement. It is not uncommon to find some cheques missing from the bank statement, particularly if they were written toward the end of the time frame you are working with. Make a list of any outstanding cheques and their amounts.

Cash Withdrawn

Take note of any cash withdrawals made that are listed on the bank statement and match them to the entries in your ledger. If you have missed some, you will have to add those into the ledger at this point. This is also a time when the alarm bells go off if there are withdrawals that you simply can not account for. Do not hesitate to contact your bank and ask questions if something seems out of place, particularly if you have been diligent in recording withdrawals in your ledger.

Interest and Bank Fees

Finally, you will need to take note of any interest paid by the bank into your account or any deductions they have made from your account for transaction fees and add these to your ledger.

At this point, your ledger should have the amount listed that you will be balancing to. Take the amount listed on the bank statement, add any deposits that are not listed and then subtract any checks that are outstanding. The total you arrive at should match the one on your ledger.

Some points to keep in mind if you are just getting started with balancing your checkbook:

- It is not unheard of for cheques to remain outstanding for more than one balancing time frame. If you have kept a list of cheques you have written, you will want to possibly go back over your bank statements for a period of roughly six months and verify that all cheques you have written have also been recorded on your bank statements. If you have not kept track of checks you have written, start doing so at once and leave room in your budget for a few surprises until your tracking is showing all cheques from past balancing periods to be accounted for.

- If you have not been keeping a ledger or record of your transactions up until this point, it is going to take a bit of time for you to be able to balance your chequebook properly. You can not balance to records you do not have. Once again, get started with daily recordings of any transactions and in a month or so, it will begin to fall into place.

The purpose of balancing your chequebook to your bank statement is to catch transactions you may have forgotten to record in your ledger and to catch any that have no business being there. You would want to know, would you not, if money is being taken out that you did not authorize?

What balancing your chequebook will not do necessarily is give you the “spendable amount” in your bank account. As you see from the above, if you receive a balance from the bank on a given date, it may not reflect all deposits that have been made or cheques that have been written as they have not as of yet cleared. Your ledger will give you a much better indication of what amount you have available to spend.

I like to have a visible record of my account’s balance on the last day of the month. This gives me the ability to go back and see where I have been making headway and where I am falling behind. With this ability I am able to analyze what I am doing and make changes.

This is slightly more difficult to do with a program such as Quicken Deluxe. A trick that I use is to change the date of any transactions that fall on the last day of the month to the day before. I then enter a note dated the last day of the month with the balance I have arrived at. This gives me a point in time referrence that will not be lost.

Warmest regards,

SherryD

I confess that I really hate having to balance my checkbook. Not that it is as scary these days as it was several years ago when I became a single parent of three and there was always more month than money. When my kids were home, I only had to say that I was balancing the checkbook and they knew to give me a wide berth.

In those days, I didn’t have a computer, not that having a computer equals a new abiding love for the task, in fact, that is a love affair that is destined to never happen. But, in those days it was a daily, rather than a weekly or monthly chore, just to keep a tight rein on my finances. Instead of the computer, I used a columnar accounting book and noted each and every receipt. Not the sexiest way to keep track of finances, but it did the job.

As time progressed and I was able to invest in a computer, I used a spreadsheet instead of hand writing all of the entries. By that time I was up to the weekly balancing method. Because online banking wasn’t “the thing” to do then, I still relied on hoarding receipts and entering each one. While this method is still a good means of keeping track of expenses, it required dedication to keep it up to date. You really do not want to have to sit down and manually enter a month’s worth of receipts. There needs to be a limit to the amount of torture that is self-inflicted.

The account book or spreadsheet method to balance your checkbook is fairly easy to do with just a bit of practice. If you would like a bit of a guide on how to do it, check out my post on Using A Home Budget To Reduce Debt. Here I explain more on this process, where to get a free spreadsheet program, and give you a spreadsheet-formatting template you can download to help you get started.

As ornery as my mood gets when it is time to balance my checkbook, it sure makes income tax time a whole lot easier. In addition to the spreadsheet, which can be printed out at year-end for a paper record, I also have a 2″ binder that I store the major bills in. A good 3-hole punch and a few dividers makes this easy to do. You notice all of these items are readily available at your local office supply store and fairly inexpensive.

Tight budgets demand that you pay close attention to money going out. It is only by doing so that you are able to spot wasteful patterns and it serves as a constant reminder when you are tempted to spend money that you really shouldn’t.

As time progressed I moved to using software instead of spreadsheets to manage my checkbook. I really like using Quicken Deluxe. I have used this software for a number of years now. It gives you the ability to balance your checkbook quickly and easily compared to the other two methods.

Some advantages are:

• The ability to download transactions from your bank account to your Quicken software.
• Better organization using expense categories.
• Create a savings section without needing another bank account.
• Instant access to tax related expense totals
• Less chance of time consuming errors

Quicken Deluxe helps you set budgeting and savings goals, while allowing you the ability to see where your finances are at, at a given point in time. If you use Tax Turbo, you can export information directly, another tax time advantage. You may have guessed that tax time isn’t one of my favorite chores either.

Whichever method you choose when it comes time to balance your checkbook, your finances will benefit from the added attention they are given and it may help you weather this chore easier.

Get Quicken Deluxe Here!

Warmest regards,

SherryD