Guide
Reconciling, and why it is the one habit worth keeping
Reconciling is an old idea, older than any accounting software, and a simple one. You have written down what you believe happened to your money. Your bank has kept its own account of the same events. Reconciling is the act of laying the two side by side and satisfying yourself that they agree.
It is worth doing because you are never really in doubt afterwards. Most of the anxiety people carry about their own finances comes not from the numbers being bad but from not being certain the numbers are right. Ten minutes a month removes that doubt entirely, and leaves you with something more useful than reassurance: a short list of things that do not agree, each of which is telling you something you would rather know.
A payment you forgot to record. A record you entered twice. A tenant who paid forty dollars less than the tenancy says they should. None of these announce themselves. All of them turn up the first time you reconcile.
What actually happens
You give the app your bank transactions, either by pressing a button if you have connected a bank feed, or by dragging in the CSV file your internet banking exports. The app then reads every transaction and tries to find the record you already entered for it.
Most of them it finds. Those are ticked green and you never think about them again. What is left over is the part that needs you, and it is presented as four short lists rather than one long one: what matched, what could not be matched and why, what you recorded that the bank has no record of, and anything that needs a decision rather than a match.
How the matching decides
This is worth knowing, because once you understand it the results stop being mysterious.
A match is never made on the amount alone. Two rent payments of six hundred and fifty dollars in the same month are indistinguishable by amount, and guessing between them would be worse than useless: it would be confidently wrong, which is the one thing accounting software must never be. The name on the transaction has to agree with the contact on the record as well.
Bank statements being what they are, that name is rarely tidy. "AP J LEE RENT" is Jordan Lee paying rent, but no computer knows that on first acquaintance. So the app learns. The first time you match that line by hand, it remembers the payer. The following month it recognises them without being asked. After one cycle, your regular tenants and regular suppliers match themselves.
Expenses are matched a little differently, because a bill is paid when it falls due rather than when it was written. The app looks at the due date on the invoice, with a window of a few days either side, which you can widen or narrow in your settings if your habits are unusual.
What it will not do to your work
Two guarantees, both of which exist because their absence would be intolerable.
Once a transaction is matched, it stays matched. Re-importing a statement, importing a longer one that overlaps, uploading the same file twice by mistake: none of these undo work you have already done. This rule was written into the app after a re-import once wiped an afternoon of matching, and it will not be relaxed.
And rent is never matched to a reimbursement. They share a bank account, so they appear on the same statement, but they are reconciled separately and each reconciliation only offers you records of its own kind. It is therefore impossible to attach a rent deposit to a reimbursement record by accident, which would be a hard mistake to spot and a worse one to undo.
When you finish
A completed reconciliation downloads as a PDF: what was on the statement, what each line was matched to, and anything left over. Accountants like receiving these, because it saves them asking for them.
Every income and expense record also gains a small mark, green when it has been reconciled and amber when it has not, so the question "have I checked this?" is answered at a glance from the list, without opening anything.
And if you have connected Xero, reconciling an expense marks the corresponding bill as paid over there too, without you pressing anything. Reconciling is precisely the moment the money is known to have left the account, so it is precisely the moment Xero ought to be told.
Where to go next
- Bank feeds - stop downloading files, and let the transactions arrive on their own.
- Xero - keep your accountant's books in step without typing anything twice.