Now that we have discussed the concept of reconciling, it’s time to go over the steps. You can adapt these steps to work with whatever tool you use to track your spending and income.
Since I use YNAB as my tracking tool, I am going to show you how to reconcile using that software. But the principles are the same for any tracking tool.
Steps to Reconciling
- Go to your bank account online so you can see the list of transactions. (If you cannot do this, then you will have to just use your latest statement and reconcile once a month.)
Note: Sort them by date, with the most recent transactions first.
- Print out a copy of your transactions from your bank.
- Open up your YNAB register. Print it out by going to File/Print while in the register.
- Now, put the sheets side by side. Look at your bank account and take each transaction one by one, starting with the most recent.
- For each transaction you find in both your bank printout and YNAB register, put a check mark next to it on each piece of paper.
If there is a transaction that only shows up on one of the printouts, circle it. This is key as you will need to figure out why it isn’t showing up both places.
- When you have finished, go back to your YNAB register on the computer.
- Next to every transaction that has a check mark, click the green C button to the far right of the transaction to show that it has cleared your bank account. Below is an image of YNAB transactions with the C button clicked and showing green and uncleared transactions where the C is grayed out (click the image to enlarge it):
- Next, go back to your printouts and for each that is circled, you will need to figure out why and fix the problem.
- If you are in DA HOW, you can go back into your book where you write your numbers for your sponsor daily and check the date of the item that you cannot find to see if you just forgot to put it in your spending plan tool.
- Maybe you put in an item as a debit, when it was really cash … or vice versa.
- I keep all my receipts until I have cleared the accounts for the end of the month, just in case of this kind of problem. If you have them, check through your receipts to see if there is a match.
- When you have finished and there are no more discrepancies, compare the Cleared Balance (the one on the far left in the image below) with the most current balance in your bank account. They should be exactly the same.
- The Working Balance is the balance in your spending plan tool and includes every transaction.
- Uncleared Transactions are those that you have entered into your spending plan tool that have not yet been accounted for by the bank.
- Cleared Balance is the difference between the balance in your spending plan tool minus the uncleared transactions (in YNAB – cleared transactions have the C button showing green) and should be exactly the same as your most current bank balance.
If these numbers aren’t equal, then you will have to figure out where there is a problem. There is a way in YNAB to adjust the balance, but I strongly advise that you do all that you can to find the mistake. There is always a reason. If you are only off a few cents, then, it may be worth it to do the adjustment.
Tip: Once you have gotten into the habit of reconciling, what I do in YNAB when I reconcile is to red flag all the uncleared transactions before I start the process. Since I know that my YNAB was reconciled with my bank account before, if there is a weird problem, I can uncheck the C button only next to the red flagged items and start over.
Once I have finished and know the cleared balance in YNAB is the same as in my checking account, I can select and remove the flags.
Here is a screen shot example of uncleared transactions with a red flag to the left of them as I start to reconcile. (click the image to enlarge it):
Congratulations! You have now learned the basic steps to reconciling. Remember, the point is to know what items have not yet cleared your bank account and to be sure that your spending plan tool is accurate. While this may seem daunting if you have never done it before, I cannot express how much better you will feel once you have learned this skill and have gained the clarity that it offers.