All About Reconciliation

An accounting chore that no one looks forward to is reconciling your books. There’s a common misconception in nonprofit accounting that your financial reports have to perfectly match your bank account. That’s not necessarily the right thing to strive for, especially if you use accrual accounting. 

However, a simple, thorough monthly reconciliation process is necessary for every nonprofit. Use this guide to think about how you reconcile at your organization, and hopefully make some tweaks to your process, for the better. 

What Is Reconciliation? 

Reconciliation is a way to check whether or not you are doing your bookkeeping correctly. At its simplest, it is a process that places your internal data sources (like your QuickBooks, or other General Ledger Software) next to external data sources (like bank or credit card statements) and compares them. A financial cross check, if you will. 

Why Reconcile?

Reconciliation is an important accounting process for a few reasons. While it’s technically not required for nonprofits, reconciliation makes it possible to meet IRS and funder-mandated requirements. Here’s why it’s so important: 

• Reconciliation prevents and catches fraud. Every organization wants to avoid fraud, and just having checks in place can deter potential fraudsters. And, reconciling on, say, a monthly basis, allows you to detect and address fraud early on before there are large consequences. 
• Reconciliation sets you up for frequent and accurate financial reporting. Having access to up-to-date financial reporting has a lot of benefits. Reporting to funders, external audits, your 990, internal strategic decision making – all are dependent on good financial reporting. 
• Reconciliation helps you get ahead of errors in your books. This, in turn, makes closing out each month a lot easier. 
• Reconciliation ensures compliance with restricted funds. If your organization is managing funds restricted by a donor or government agency, detailed tracking of how those funds are spent is paramount. Reconciling is adding one more check to ensure you are being compliant. 

Who Reconciles? 

Ideally, a trained and experienced accountant reconciles your books. Best case scenario, it is also someone who is not managing your spending and income on a day-to-day basis. For smaller organizations, this is a good job for the Treasurer on your board. Some medium-to-large size organizations outsource this job to accounting firms. 

What do I Reconcile? 

For smaller nonprofits, a monthly reconciliation of your bank statement and credit card statement is enough. Larger organizations might consider reconciling more frequently, and reconciling items like asset accounts, payroll accounts, bills, invoices, and many others. Each of these items have their own processes, but the general principles remain the same across documents. 

How to Reconcile 

The idea of going through every deposit and expense is daunting, and reconciling used to be very, very time consuming. Luckily, nowadays, accounting software like QuickBooks has built-in automation features that make reconciling easy. Most allow you to upload a bank or credit card statement, and Voila! Anything that doesn’t match up is flagged. That way, you can spend your time on what matters most: identifying the reasons behind discrepancies and correcting errors. 

Why Doesn’t It Match?

Uh oh. You’ve run into an error. There are a few common reasons why your books might not match your account statements: 

• Timing – Sometimes checks or autopayments haven’t cleared before the bank statement is produced. This would make an expense or deposit show up in one place and not another. 
• Fees – Service charges, overdraft fees, payment processing fees, and the like don’t always make it to your bank statement or books. Sometimes, it’s as simple as adding those in manually. 
• Human Error – Us homosapiens have a tendency to type in the wrong digit or date, or forget about a transaction entirely. Once in a while, that shows up in our books. 
• Fraud – While unlikely, if you’ve ruled out all the options above, you may be looking at fraud. If you suspect fraud, gather the evidence to establish loss and file an insurance claim. And, of course, address the cause of the fraud internally. 

Outsource Reconcilitation

If your organization simply lacks the capacity to reconcile regularly, it may be time to look externally for support. As always, if you think the Beancount team can help you with your books, reach out. 

Resources and More

This blog post was written with the assistance of the following materials:

• NPact: How to Reconcile Non-Profit Financial Data for a Strong Start in 2025
• Jitasa: Financial Reconciliation: The Part Your Accounting Team Plays
• GoodUnited: Simplifying Payment Reconciliation for Nonprofits
• Nonprofit Accounting Basics: Bank Reconciliations

This article is for general informational purposes only and does not constitute professional accounting, tax, or legal advice. Tax laws, regulations, and accounting standards change frequently, and the application of rules can vary based on your organization’s specific facts and circumstances. Before acting on anything you read here, consult a qualified professional who can advise you based on your situation.