Why it's important to reconcile an account?

Hello!

I've seen the documentation regarding accounts reconciliation, but I think I still don't quite understand why it's important to reconcile an account.

So the article says to reconcile if the balances match (between YNAB and your bank account). But imagine that somehow the balances matched but some of the transactions themselves are off, how can we correct that after a reconciliation/lock? Isn't that annoying?

I feel that reconciliation could work out if one goes through the monthly bank statements and 'locks' the transactions out. And what about 'wallet/pocket money' accounts, should we reconcile those too?

Overall I feel that reconciliation makes you have less flexibility to 'correct' history and (at the moment) I'm not seeing any more advantages than 'locking' transactions somehow.

On another hand, one can always reconcile, and if there's something off, re-add transactions on a certain date and reconcile again, right?

Anyway, if anyone could explain me the reason behind reconciliation, would be super! 馃憣

Thanks, 馃檶

Pedro

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  • Reconcile, as I see it is the end of the month process to verify everything is absolutely correct at the end of the month.  I understand a lot of people do that on-the-go using online balances, but I prefer to double check everything against the account statement at the end of the month, then as you say, lock out the transactions.  It's a way for me to put the month completely behind me and have zero doubt that everything is correct.  It also allows me to lock out reconciled transactions and hide them, keeping my list of transactions shorter.

    With credit cards, I pay off any balances during reconciliation and again when the monthly payment is normally due.  So, paying off twice per month makes sure I never incur interest fees or accidentally let balances ride.

    I do reconcile my "cash" accounts as well.  At the end of each month I count up my money in my wallet or pockets or whatever and check it against the balance in my "cash" account.

    I'm not sure it's something everyone needs or wants to do, but I think those that come from the Quicken era, it is the added confidence that everything is completely accounted for correctly at the end of the month.

    Another reason I do it, is it forces me to look at my statements once a month.  Sometimes there's notes or charges, or other communications that I would have missed.  If I didn't reconcile to my statement once per month, I'm not sure I'd still be looking at my statements every month.

    Overall, I have a lot of accounts, it helps me always be certain my affairs are always in order.  I hope that helps.

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  • First thing to note is that transaction aren't permanently locked when you reconcile, you still can edit them.

    I find that reconciling frequently (weekly) helps me sort discrepancies more quickly. When YNAB doesn't match my real balance, I know that I only need to check the transactions since list reconcile to find the problem. 

    This makes it easier because i can filter away reconciled transactions (marked with padlock although still editable) and concentrate on the most recent to find the problem.

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  • Pedro Machado Santa said:
    , if anyone could explain me the reason behind reconciliation, would be super!

     Hey Pedro - I'm new to YNAB and just tested reconciliation so I'll give you my thoughts.

    So "Reconiliation" is  important to me because it means that my banks and YNAB "agree" regarding how much money I have to work with in my accounts.   I need to know that YNAB is accurate in terms of how much money it thinks I have, that way I don't make plans for money that doesn't really exist. 

    Because "Reconciliation" is only about making sure my bank and YNAB "agree" regarding how much money I have, it doesn't matter how I've budgeted money or even whether the Payee or Budget Category in the transactions are correct (I can change those any time, even if a transaction is locked).  But it absolutely matters that the account balances and the cleared transactions ("cleared" means my bank also recorded the same transaction) match between YNAB and my bank.  Once I've confirmed they agree, I want to "lock" all cleared transactions in YNAB so I know they won't impact my account balances any more.  If I don't reconcile, then I can't be sure that YNAB and my banks agree regarding how much money I have and then I might use YNAB to make plans for ("budget") money I don't actually have (that would be bad).

    Once I'm happy that they agree, I also want those cleared transactions "locked" so I don't have to deal with them any more... filter them out so they don't clutter the account activity list ... etc.  I'm essentially done dealing with them ever again.   Also, next time I reconcile, if YNAB doesn't reconcile with my account balance, I know I can safely ignore those "locked" transactions and just focus on the cleared/uncleared transactions when trying to find the error. 

    BTW - Since I'm new to YNAB, I tested reconciliation and intentionally "locked" some transactions that I shouldn't have just to see how YNAB would let me deal with it.  You are right - I could not "unlock" it but (as Aquamarine Storm (67697f3db38d) pointed out, you can edit it in every way.  I was also able to delete and re-enter it very easily (15-20 seconds).   But again, I should NOT ever have to do that once reconciled ... but I tried it just see what would happen and YNAB let me.  In reality the only thing I might ever change on a locked transaction is the budget category.

    Not sure what you mean by "cash accounts" ... you mean like a generic budget category that you might use to record a non-specific cash withdrawal?  Or do you mean you have a disconnected account that reflects a physical stack of cash?  Or so you just mean cash/checking accounts?  Either way, I think the idea is the same ... YNAB's balance just needs "agree" with the amount actually available.

     

    HTH
     

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  • Hi Pedro Machado Santa !

    I learned first-hand how important it is to reconcile an account - you don't have to reconcile every day, or every few days, just find a pattern you're comfortable with in your Budget Routine.

    Before we were married, my husband and I had separate budgets. One day I checked his budget, realized the amounts didn't match, and subsequently spent Hours fixing the issue. 馃槗 He had never reconciled and I found the culprits multiple months back, meaning his budget had been misleading that entire time! While we suggest entering an adjustment instead of spending too much time investigating, I was determined to get to the bottom of things.

    It helps to think of reconciling as a safety net. When you reconcile, you know that up to that point everything is balanced and correct. That way, if ever things fall out of balance, it's easier to pinpoint where things went wrong and allow you to confidently move forward.

    I'm going to move this over to the Tips & Tricks discussion thread to see if anyone else will weigh in. :)

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    • Faness Budget routine link is 404 - not found.

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    • Hi Cadet Blue Nomad !

      Sorry for the confusion! We're always updating our documentation and that article is no longer available. You can find tips on creating A Daily Budget Routine here!

      I鈥檇 also recommend taking our free 20-minute workshop called Your Budget Routine. You鈥檒l learn how to build our import features into your routine so you can stay focused on your Budget.
       

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  • hi Pedro, i came her looking for info on this exact topic. i now believe it is better to not reconcile your busiest  accounts because if you get in there later on and change something, switch categories, or make some kind of error it can be hard to find it. and i can't take it when my accounts don't reconcile. even by one penny - let alone by $10 or more. i have to correct it. but if i've reconciled the account it becomes too hard to cross check with my statements. that is why from now on, only accounts that i use less frequently will i reconcile. accounts where i can see a months transactions on one screen. that is NOT my checking account because i may have anywhere from 3 to 10 transactions a day. i need to be able to fix my mistakes easily. clearing transactions will be enough for my checking account. i can still see that my numbers match the banks. so in that sense, i have "reconciled" if the numbers match.  i'm only going to use the reconcile function on accounts that i use less frequently.

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      • WordTenor
      • Can we agree that goals are dumb and immature? Sure.
      • WordTenor
      • 2 yrs ago
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      Cyan Saxophone I encourage you to think about it differently. Your busiest accounts need to be reconciled more often, not less. 鈥淩econciling鈥 is just as you are doing, checking that the cleared balances match. Using the reconciliation tool in YNAB sticks a stake in the ground to say, 鈥淎t this moment I know my account matched.鈥 If you really need to go back and fix a reconciled transaction, you always can, but using the tool allows you to say, 鈥淭hese transactions are right.鈥 That way, if you do discover a discrepancy down the line, you aren鈥檛 forced to consider every transaction you鈥檝e ever made as a possible culprit. The busier the account, the more transactions you have to sift through to find an error if you haven鈥檛 reconciled using the tool. 

      I reconcile my busiest account about once a month. 

      Like 5
    • WordTenor i see your point. The problem is I made some weird mistake when I was consolidating categories. I think I deleted something and I'd like to find it and fix it. I'd like to reconcile each month again but YNAB doesn't work like that. It's sort of hard to explain but I messed something up and I can't find it. I could find it if I could reconcile again but it's locked. Now I have to work around. I wish I hadn't reconciled. Then I'd have more freedom.

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      • nolesrule
      • Been waiting 5 years for the Stealing From the Future fix...
      • nolesrule
      • 2 yrs ago
      • 4
      • Reported - view

      Cyan Saxophone That's going to be a difficult task at best, unless you have an approximate idea of the transaction date for the deleted transaction. In your case, I would make a one-time reconciliation adjustment, make changes to get TBB back to zero, and move on.

      Like 4
  • You are right about that. I think will. I'm just such a freak about that. I should just let it go. Life is too short and it will not impact my life in any real way. It's about $80.  It just bugs me. But you are right, fix it and move on. I'm so jealous of you rational people...

    Like 2
  • You have to manage two balances.

    The balance you think you have, which includes all the things that haven't cleared or pending and the balance the bank thinks you have.  You reconcile to get you and the bank in agreement.

    Without reconciling you will not find the random charges that someone might have pushed onto your card when it was compromised.  Many of these cases are small dollar so it's harder to notice.  If people never reconcile it's easier to do.

    My biggest problem is restaurants will alter the tip amount just a little bit from what I recorded in YNAB.  They are effectively skimming off every credit card but hardly enough to notice unless you are really diligent.  Therefore, cash is pretty popular with me when I am expected to tip.  You can't steal cash so easily.

    Basically, you are keeping everyone honest.

    When checks were more prevalent and mailing a check could take 10-14 days to clear, reconciling was very important because you would look at your checking balance and think, "I've got tons of money" when you are just waiting for Rent to clear or that new Washer & Dryer to clear.

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