If you’re a freelancer or run a micro-business, you probably wear many hats, including a bookkeeping hat from time to time. One aspect of double-entry bookkeeping that some people find confusing and painful is bank reconciliation. Thankfully, when your business uses Flare Cloud Accounting, the bank reconciliation process is much easier, more streamlined and faster than a manual method of reconciliation.
What is Bank Reconciliation?
Bank reconciliation is a process of matching transactions between your bank statement and a bank book. You can think of bank accounts you create in Flare as a type of bank book. In Flare, we refer to them as “book accounts” to help differentiate them from your real-world bank account statements.
Your business’s bank account statement’s transactions and book transactions are usually different until they are reconciled. A few examples of common discrepancies between book and bank transactions occur when: checks you’ve written and recorded in a book account have not yet cleared the bank, payments you received were not recorded to your book account, and, bank service charges you haven’t recorded because they vary from month to month.
These are but a few common reasons your book accounts and bank accounts frequently do not match. Reconciliation then, is the process of matching book account transactions with actual bank account transactions (from bank statements) so your book accounts accurately reflect what’s happening in your real-world bank accounts. In Flare, you can either import bank statements or set up a bank feed connection, then begin the process of matching, adding or ignoring transactions that appear in your bank statement.
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Reconciliation Actions in Flare
When you reconcile transactions in Flare, you are presented with a side-by-side view of bank transactions and book transactions, which allows you to compare then match, add or ignore transactions.
A transaction in your bank account statement is also in your book account.
A transaction is in your bank account statement but is NOT in your book account. You recognize the transaction and add it your book account. In Flare, you can select a chart of accounts category for a transaction before you add it to your Flare book account.
A transaction is in your bank statement, but does not pertain to your business. It could be a payment you made from a business bank account for something personal (as an example). You simply ignore the transaction and Flare removes it from the imported or downloaded bank statement.
The process of matching, adding bank transactions to a book account, or ignoring transactions is partially automated.
If you make a mistake, no problem! You can easily find and unmatch a previously matched transaction, or, restore a previously ignored transaction and then match or add it to your book account.
Take a Free Test Drive of Flare’s Bank Reconciliation Feature
Sign up for a Free 30-Day Trial and check out bank reconciliation and other helpful bookkeeping features. Flare is much more than accounting software, though! With Flare, you can easily know business finances and grow profit. No experience needed.