Over the last few years, many clients have asked me about bank downloads; the process of importing bank and credit card transactions directly into accounting software rather than entering and reconciling them manually. It’s a fair question, and worth looking at closely.
Traditionally, reconciliation has always been a cornerstone of good accounting. We enter each transaction into the ledger or software, then compare those entries against the bank or credit card statement. The reconciliation process ensures two things: that no data entry errors exist, and that no unauthorized transactions have slipped through. It’s a built-in check and balance.
What many small businesses do today looks very different. Instead of entering transactions, they simply wait for charges to appear online and then push those transactions into the software. The books will line up with the bank, but the double-check is lost. In practice, this means taking the bank’s word for what happened.
The problem with that approach is simple: banks make mistakes. Like any organization relying on people and complex systems, errors occur. I recently caught one where a client deposited a $1,000 check, but the bank only credited $100. The teller misread the amount and didn’t bother to check the written words on the check. Granted, this happens less often with today’s technology, but it still happens.
Now, I’m not suggesting you give up efficiency or the convenience of modern tools. What I recommend instead is using software like Dext, a receipt management program. With Dext, you can snap a photo of a receipt right at the vendor, or forward an email receipt, and the software transcribes the information into your accounting program. This way, you maintain accurate source records for IRS audit protection, and you restore the checks and balances that bank downloads alone don’t provide.
Used this way, your downloaded bank feeds become what they were always meant to be, a verification tool. They should confirm the transactions you’ve already entered, not serve as your only record. That slight shift gives you the efficiency of automation without giving up accuracy or control.
