Putting Accounts (And Life) in Balance

Today's blog post comes from our Nonprofit Accounting Manager, Traci Carson. For Traci, the word "balance" means more than just a $0.00 difference.

Stones balancing on a rock at sunset.

The word “balance” has always been one that I have been drawn to. I am a math nerd at heart and love that an equation is equal when both sides of it end up as the same number. There is something to be said, too, as a busy mom, that I try to keep my life activities balanced to put forth my best in all areas. We are pulled in so many directions that our activities become a balancing act that many times becomes off-balance and that leaves me feeling quite unbalanced.

It is an effort to maintain balance, and doesn’t just happen because I want it to. A conscious effort has to be made to meet the needs of our children, my spouse, my employees, my friends, my commitments, myself. Although I know that life is moving too much to ever be completely balanced, I also know that I can work to keep it balanced enough to accomplish what I need to and feel good about it.

As an accountant, the word "balance” is vital to my everyday work. However, too often in personal lives and businesses alike, bank accounts and other balance sheet accounts are not regularly balanced to an outside statement or with good internal information. Simply calling the bank and asking for your current balance is not the same as balancing your account! One of the most basic financial guidelines that should be learned from the first time we open a checking account as a teenager is to balance the account every month. This process not only helps you understand what you are spending your money on, but it also keeps you protected from unauthorized transactions or bank errors.

Reconciling accounts using financial software such as Quicken and QuickBooks is a simple process – simply go to the account and click on the Reconcile button. You will be asked to provide information from your bank statement and then you simply start checking off the transactions in your software program that appear on the bank statement. When all transactions are accounted for, you will see a $0.00 difference at the bottom of the screen and your account will be balanced. When there are transactions that you don’t recognize, you should research them and resolve the discrepancy.

If you have non-bank accounts on the balance sheet, it is good practice to review these on a regular basis too. Accounts Receivable can quickly fill up with past due customers if you are not monitoring it regularly. Liabilities such as credit cards should be monitored for unauthorized transactions and other liability accounts should be reviewed to make sure amounts you have held back for someone else’s benefit are being paid out correctly (e.g. payroll tax withholding, retirement benefits, health insurance). At the end of each month, all of the accounts on your balance sheet should be in balance.