If you’re not reconciling every month, your books are lying to you

Sarah thought she was on top of her game. Her financial advisory practice was thriving, client assets under management were climbing, and she’d finally hired that associate she’d been putting off for months. But when her CPA called in March with a bombshell about her year-end financials, her confidence crumbled faster than a house of cards.

“Your books show $47,000 more in revenue than what hit your accounts,” he said, his voice carrying that particular blend of concern and frustration that accountants reserve for moments like these. “We need to figure out where this discrepancy came from.”

Sarah’s stomach dropped. She’d been diligent about entering transactions, tracking client fees, and monitoring expenses. How could her books be so far off?

The answer was deceptively simple: she hadn’t reconciled her accounts in eight months.

The Silent Killer of Financial Accuracy

Here’s the uncomfortable truth most financial advisors don’t want to face – your bookkeeping software doesn’t talk to your bank. Those automated feeds? They’re helpful, but they’re not foolproof. Duplicate transactions slip through. Bank fees get miscategorized. That $2,500 client payment you recorded? It might have bounced, but your books don’t know that yet.

Without monthly reconciliation, these small discrepancies compound like interest, creating a financial picture that’s increasingly divorced from reality. You’re making business decisions based on phantom numbers, and that’s a recipe for disaster in our industry where precision isn’t just preferred – it’s required by regulators.

First—What Does “Reconciling” Actually Mean?

Reconciling is the process of comparing your accounting records against your actual bank and credit card statements. You’re verifying that what’s in your books matches what’s in reality.

It’s not just about spotting duplicate transactions or catching a typo. It’s about making sure the cash in your accounting system is the same cash your bank says you have. That means you’ve accounted for every deposit, expense, refund, fee, and transfer—accurately and completely.

When done right, it’s the financial version of checking your mirrors before changing lanes.

What Happens When You Don’t Reconcile?

Let’s be blunt: bad data leads to bad decisions. And unreconciled books are filled with bad data.

Here’s what happens when you skip monthly reconciliation:

• Cash flow looks stronger than it is. Uncleared checks, duplicate deposits, or missed fees distort your balance.
• Expenses are understated. Especially if you rely on credit cards or auto-drafted payments. Those don’t always get captured correctly.
• You overpay (or underpay) taxes. That opens the door to penalties or audits.
• Your reports lie. P&Ls, balance sheets, budgets—everything you base decisions on becomes suspect.
• You lose credibility. Lenders, partners, and even your CPA will start to question the numbers.

I’ve seen owners run profitable businesses on paper while bleeding cash in real life—all because they weren’t reconciling.

The Real-World Fix: Build a Monthly Close Process

Reconciling doesn’t have to be a heavy lift. But it does need to be part of your monthly close routine. Here’s what a clean, real-world process looks like:

1. Download your statements. Don’t rely solely on the bank feed. Pull your official bank and credit card statements.
2. Categorize and match transactions. Use your accounting software’s reconciliation tool (e.g., FreshBooks “Reconcile” function) to compare and match line by line.
3. Investigate discrepancies. Any unmatched transaction needs attention. Is it a timing issue? A duplicate? A missing entry?
4. Clear uncleared transactions. Old outstanding checks or deposits that never hit? Deal with them. Don’t let them linger for months.
5. Reconcile petty cash, PayPal, and merchant processors. If it touches money, it needs reconciliation.

Bonus: Always reconcile before running reports or doing your monthly financial review. Otherwise, the data’s garbage.

Tools That Actually Help

Don’t overcomplicate this. You don’t need expensive apps or flashy dashboards. What you need is consistency and clarity.

• FreshBooks has a solid built-in reconciliation feature. Use it.
• Bank Rules save time but need to be reviewed regularly.
• Reconciliation Reports—save a PDF copy each month as part of your documentation trail. If you’re ever audited, this becomes gold.
• Checklist in Notion, Google Sheets, or your task manager. Build a simple workflow you follow every month.

This isn’t sexy work—but it’s foundational. Skip it and everything else cracks eventually.

Final Thought

You wouldn’t sign a contract without reading it. Don’t trust your books without reconciling them.

If you’re behind, start fresh this month. Reconcile one account. Then the next. Get back to baseline and make it part of your monthly rhythm. It’s not optional. It’s not “nice to have.” It’s non-negotiable.

Too busy to dig through your books every month? If you’re ready to hand off your bookkeeping to someone who actually understands business, get in touch. You run your business—I’ll keep the numbers honest.