The One Habit That Keeps Your Balance Sheet Accurate

By John Charette, CPA, CMA – Owner & Your CFO at Phoenix CFO Solutions

Your balance sheet is the fortress of your business. It holds everything you own, everything you owe, and the residual value you’re building over time. When it’s accurate, it gives you confidence. When it’s not, nothing else can be trusted.

The habit that keeps it accurate is reconciliation. And if you’re not reconciling your balance sheet accounts every month, that’s exactly where errors, duplicates, and forgotten items hide. This is where the gremlins live. In this post, you’ll learn why balance sheet reconciliations matter, what goes wrong when they’re skipped, how to fix broken accounts, and how to keep them clean month after month.

When You Don’t Reconcile, Rot Builds Up Quietly

The problem with skipping reconciliations isn’t that things immediately break. It’s that rot sets in slowly.

Errors don’t announce themselves. Duplicate transactions sit unnoticed. Legitimate items never get cleared. Over time, balance sheet accounts fill up with things no one remembers creating. Eventually, you’re staring at an account that makes no sense and feels impossible to fix.

This matters because the balance sheet isn’t optional. It should be reviewed regularly to confirm that errors, duplicates, and legitimate items are either corrected or resolved. When that doesn’t happen, balances drift further from reality every month.

Maybe something was coded to the wrong fixed asset account. Maybe a long-term item was mistakenly left in a short-term account. Reconciliations surface these issues quickly. Or a duplicate check may have been cut—something that will never clear the bank unless someone catches it during reconciliation and removes it properly.

Sometimes the items are legitimate. A customer refund issued years ago that was never cashed. A credit card dispute that moved to the balance sheet and was forgotten. An asset that was sold but never removed from fixed assets. These are real transactions that quietly pile up and poison the balance sheet. Reconciliation is how you find them before they distort everything else.

What a Real Reconciliation Process Actually Looks Like

Once you understand what can go wrong, the next question is how reconciliation should actually work.

Every reconciliation starts with a source of truth. For banks and credit cards, that’s a statement. For fixed assets, it’s a rollforward. For prepaids and accruals, it’s a supporting schedule. If you don’t have a source of truth, you’re guessing.

Next, you go into your accounting software and check off transactions one by one. Each item in the general ledger should match something in the external source. Nothing gets assumed. Nothing gets skipped.

After everything that should match has been cleared, you review what’s left. These uncleared items are where the work happens. Some need to be corrected. Some need to be deleted. Some require follow-up. An uncleared check might mean issuing a replacement or confirming whether it can still be deposited. A duplicate needs to be removed. A stale balance needs to be resolved with documentation.

Reconciliation isn’t just checking boxes. It’s proving that the balance sheet agrees with reality.

Clean Once Is Good. Staying Clean Is the Game-Changer.

Fixing a broken balance sheet feels great. Keeping it clean is what actually changes the business.

One-off cleanups don’t last without structure. Maintenance requires repetition and discipline. The first step is putting reconciliations into your close checklist and onto the calendar as a recurring task. This isn’t cleanup work. It’s a normal business operation.

Next, you need to know when truth sources are final. When do bank statements close? When do credit card statements post? When are depreciation, amortization, and accrual entries booked? Reconciliation only works when the timing is understood and consistent.

Finally, nothing should linger. Uncleared items must be addressed quickly. Some accounts should never carry unexplained balances. Credit cards, fixed assets, prepaids, and intangibles should always tie to their schedules. Staying on top of these accounts aggressively is the only way they stay clean.

Why a Clean Balance Sheet Changes How You Run the Business

When reconciliations are done consistently, the balance sheet stops being scary.

Accounts match their sources. Ratios become meaningful. Trends make sense. You trust what you’re looking at. Instead of avoiding the balance sheet, you use it to evaluate performance, manage risk, and plan ahead.

This is where Phoenix CFO Solutions takes the pressure off business owners. We handle reconciliations properly and consistently so your balance sheet stays accurate month to month. No guessing. No buildup. No fire drills.

You should’ve built this habit yesterday.
The next best time is today.

Book a free consultation with Phoenix CFO Solutions, and let’s get your balance sheet reconciled, accurate, and kept that way so you can focus on running the business instead of fixing the books.