Managing money causes a great deal of stress for people who do not have financial training. Just knowing how much is in the bank, and how much is left that can be spent is a challenge.
Taking the time to perform a simple bank reconciliation each month can help ease those concerns. If a reconciliation has not been done on the account, or the reconciliation is old and useless, following the steps below can create a good starting point quickly and easily.
Establishing a Starting Balance
The items needed for a quick bank reconciliation:
- The most current statement for the account from the bank.
- The listing of all checks written against the account.
Checking Account Float
There are likely checks or deposits that have not been registered by the bank for this month. Checks written near the end of the month may not be recorded in the bank account.
The time between when checks are written and when they reach the bank account is called “float.” Float can be the result of the time in takes for mail to reach someone, the time it takes the recipient to cash the check, and the time it takes for the bank to process the check.
How to Do a Quick Bank Reconciliation
- On the current bank statement, find the ending balance amount. This is the balance on the last day of the period, (usually a month) after all the transactions the bank is aware of are posted.
- Compare the listing of checks written for the month to the cashed checks listed on the bank statement. Put a checkmark next to the checks that match on the check listing.
- If there are checks that do not have a mark when you are finished, subtract these from the ending balance amount. The result is an estimate of your bank balance at the end of the month.
This is an estimate because there may be checks written in a prior month that have still not been cashed. Carrying forward the reconciliation for three months, making sure there are no old checks will likely take care of the issue. Banks are reluctant to cash a check older than three months.
Once a good starting point has been established, it is important to continue to track the account, recording all the items that hit the account.
- Checks
- Deposits
- Fees
- Automatic debits (utility or other bills)
- Debit Card transactions
By faithfully recording all the entries and verifying against the bank statement, even a non-financial person can always know their checking account balance.
