Once a month, compare every deposit and payment on your bank statement with the entries in your books, mark the ones that match, record anything missing, and check that the balances agree after allowing for items that have not cleared yet. IRS Publication 583 (December 2024) says to reconcile your checking account each month. A ProfitDrawer bookkeeping spreadsheet holds your entries; you compare them with the statement yourself, as the workbook does not reconcile accounts.
Steps based on IRS Publication 583:
- Deposits. Compare each deposit on the statement with the income you recorded. A payment app payout may cover several sales.
- Payments. Compare each check, card charge and transfer, including number and amount, with your expense entries.
- Prepare the reconciliation. Start with the statement's ending balance, add deposits in transit, subtract checks or payments not yet cleared. The result should equal the balance your own records show.
- Update your books for anything on the statement you had not recorded, such as bank fees, interest or a forgotten subscription.
Common differences:
- Bank and payment app fees
- Duplicate entries
- Personal charges on the business account (record as owner draw)
- Typing errors, such as 54 entered as 45 (a difference divisible by 9 often points to swapped digits)
Doing it monthly keeps each check to a few minutes and catches errors while receipts are easy to find.
Source: IRS Publication 583: Starting a Business and Keeping Records · Updated
Tools and spreadsheets for this
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General information, not tax, legal or financial advice. Check the rules for your state and your situation.