What Does Reconcile Mean in Accounting? A Simple Guide for Nonprofits
As a nonprofit leader, you're likely focused on making an impact—raising funds, serving your community, and keeping your mission front and center. But to stay on solid financial footing and maintain trust with donors, it's critical to understand a few basic accounting concepts. One of the most important? Reconciliation. So, what does reconcile mean in accounting, and why does it matter for your nonprofit?
Let’s break it down in plain English.
What Does “Reconcile” Mean in Accounting?
In accounting, to reconcile means to compare two sets of records to ensure they match. For nonprofits, this usually refers to comparing your internal financial records (like your bookkeeping software or ledger) with external statements, such as:
- Bank statements
- Credit card statements
- PayPal or donation processor reports
- Grant disbursement records
The goal is to catch any discrepancies and confirm that your records are accurate and complete.
Why Is Reconciliation Important for Nonprofits?
- Accuracy Matters to Donors and Funders
Mistakes in your financial records—whether it’s a missing deposit or a double entry—can raise red flags. Reconciliation helps ensure your reports reflect the true financial position of your organization, which builds trust with donors, funders, and board members. - Prevents Fraud or Misuse
Regularly reconciling your accounts makes it easier to spot unauthorized charges or suspicious activity. For nonprofits handling multiple funding streams, reconciliation is a safeguard against potential misuse of funds. - Keeps You Audit-Ready
If your nonprofit ever undergoes an audit (whether internal, external, or grant-related), having reconciled financials gives you a head start. You’ll be able to provide clear, organized documentation showing how funds were managed. - Helps with Budgeting and Decision-Making
Financial decisions—whether it's hiring staff, launching a program, or applying for a grant—should be based on reliable data. Reconciling your accounts gives you a clear, up-to-date picture of what resources are available.
How Often Should a Nonprofit Reconcile?
At a minimum, nonprofits should reconcile bank and credit card accounts monthly. Some organizations choose to reconcile more frequently, especially if they have a high volume of transactions or multiple funding sources.
What Accounts Should Be Reconciled?
- Bank accounts
- Credit card accounts
- Petty cash
- Donor platforms (e.g., PayPal, Stripe, GiveLively)
- Grant disbursements and restricted funds
Anything that involves cash in or out should be reconciled regularly.
What If the Numbers Don’t Match?
If your reconciliation process shows that the numbers in your accounting records don’t match your bank or credit card statements, don’t worry—that’s actually the whole point of reconciling. It’s not uncommon, and these discrepancies can usually be resolved with a little investigation.
Here’s how to approach it:
- Check for Timing Differences
Sometimes, the issue is just timing. For example, a check you wrote may not have cleared the bank yet, or a deposit made on the last day of the month might not show up until the next statement cycle. These timing issues are normal and should be noted in your reconciliation. - Look for Missing Transactions
If a transaction appears on your bank statement but isn’t recorded in your books, you may have forgotten to enter it. This is common with automated withdrawals, fees, or small purchases. Adding the missing transaction to your books will usually fix the issue. - Spot Duplicate Entries
On the flip side, maybe a transaction was accidentally entered twice in your accounting system - this is a very common issue when syncing with donor management or bill pay platforms. This will cause your internal totals to be too high. Carefully review recent entries to spot any duplicates and remove the extra ones. - Verify the Amounts
A simple typo—like recording a $75 transaction as $57—can throw off your whole reconciliation. Double-check that the amounts in your records exactly match the amounts on the statement, especially for donations, grants, or payments. - Confirm Categorization
Even if the numbers technically match, a transaction categorized incorrectly (e.g., listing a donation as a program expense) can lead to misleading reports. Make sure your reconciled transactions are both accurate and properly categorized. - Review Adjusting Journal Entries
If someone has made a journal entry to correct or reclassify a previous transaction, that could affect your balances. Make sure all journal entries are documented and easy to trace back to the original activity. - Ask for Help When Needed
If you’ve checked everything and still can’t find the issue, it may be time to ask for help. This could mean checking with your bank, reaching out to a bookkeeper, or reviewing prior periods to make sure past reconciliations were done correctly.
Remember: Reconciling isn’t just about getting the numbers to match—it’s about understanding why they do or don’t. Taking time to investigate discrepancies helps build financial transparency, reduces the risk of future errors, and ensures that your nonprofit can confidently report to stakeholders and make informed decisions.
Final Thoughts
So, what does reconcile mean in accounting for your nonprofit? It means safeguarding your financial integrity, staying compliant, and making smarter decisions with your resources. Whether you handle your books in-house or work with an outsourced accounting partner, make reconciliation a regular part of your financial routine.
If you need help setting up a reconciliation process that works for your nonprofit, reach out to a nonprofit accounting professional who understands the unique needs of mission-driven organizations.
Need support with your nonprofit’s financials? We specialize in accounting services for organizations like yours. Let’s talk about how Complete Balance Accounting & Consulting can help you keep your books clean, clear, and compliant.
