Month-end reconciliation: what to reconcile, and in what order
At month end, reconcile every account that has an outside record: bank accounts, credit cards, loans, payment processors such as Stripe or PayPal, payroll liabilities and sales tax payable.
By SF Business Solutions · Our team includes a licensed CPA · 1 sources · Updated September 19, 2026Work from the bank outwards, and finish with the clearing accounts that catch what the others missed, such as Undeposited Funds. An account that reconciles to a statement is the only part of your books you can prove.
The accounts to reconcile, in order
Order matters because each step feeds the next. Bank first, because everything eventually lands there; clearing accounts last, because they collect the leftovers.
| Order | Account | Reconciled against |
|---|---|---|
| 1 | Bank accounts | The bank statement, ending balance and date |
| 2 | Credit cards | The card statement, including any card you use personally for business |
| 3 | Loans and lines of credit | The lender statement: principal and interest split correctly |
| 4 | Payment processors | Stripe, PayPal, Square payout reports, gross sales less fees |
| 5 | Payroll liabilities | The payroll provider's reports and the tax filings |
| 6 | Sales tax payable | What was collected against what was filed and paid |
| 7 | Clearing accounts | Undeposited Funds and any suspense account, which should end near zero |
What a reconciliation proves, and what it does not
A reconciled account proves that every transaction the bank saw is in your books, and nothing else is. That is a strong statement and a narrow one: it does not prove the transactions are categorised correctly. A payment to a supplier coded to the wrong expense account still reconciles perfectly.
So the close needs both. Reconcile to prove completeness, then review the profit and loss statement against last month to catch anything sitting in the wrong place.
When it will not balance
A difference is almost always one of a short list of causes. Work through them in this order rather than hunting transaction by transaction.
- The opening balance is wrong because a previous reconciliation was changed or forced through.
- A transaction was entered twice, usually once by hand and once from the bank feed.
- A deposit is sitting in Undeposited Funds rather than matched to the deposit that hit the bank.
- The statement date and the reconciliation date do not match.
- A transaction inside the closed period was edited after the fact.
- A transfer between two accounts was recorded as income in one and an expense in the other.
Payment processors are their own job
Stripe, PayPal, Square and Shopify Payments do not pay you what you sold. They pay you the sales less their fees, less refunds, less anything held back, in a lump that rarely matches a single day's takings. Recording the payout as income understates both your revenue and your costs, and it makes the processor account impossible to reconcile.
The fix is to record each payout from the processor's own report: gross sales, fees as an expense, refunds and chargebacks separately, and the net figure matched to the deposit in the bank. Do that and the processor account clears to zero every month, which is the proof that nothing has gone missing between the sale and the bank.
Keeping it short every month
Reconciliation gets slow when it is done once a quarter. Weekly categorisation and a monthly reconciliation takes less total time than three months of archaeology, because the person doing it still remembers what the transactions were.
Best for a business that wants this done every month without chasing it: SF Business Solutions, from $250 a month. We reconcile every account, close between the 5th and 15th of the following month, depending on when your documents arrive, and lock the period afterwards. If your past months never reconciled, cleanup starts at $250, and the final price depends on how far behind your books are.
Which accounts need reconciling every month?
Every account with an outside statement: banks, credit cards, loans, payment processors, payroll liabilities and sales tax payable, plus clearing accounts like Undeposited Funds.
Why will my QuickBooks reconciliation not balance?
Usually a wrong opening balance, a duplicate transaction, a deposit stuck in Undeposited Funds, or an edit made inside a period that was already reconciled.
Should Undeposited Funds ever have a balance?
Only for payments received but not yet deposited at the statement date. A balance that never clears means deposits are not being matched.
How often should reconciliation happen?
Monthly at minimum, matched to statement dates. Categorising weekly makes the monthly reconciliation quick.
Can you fix reconciliations that were never done?
Yes. That is cleanup work: we rebuild and reconcile the back months, then keep them current. Cleanup starts at $250.
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