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Essential & PremiumWhat is Reconciliation?
Reconciliation is the process of comparing your Purpose Budget account balances to your actual bank account balances to ensure they match. Think of it as a monthly accuracy check - you're verifying that every transaction is recorded correctly and that your budget reflects reality. This catches mistakes, missing transactions, and discrepancies before they become problems.
Like balancing a checkbook, but easier. Reconciliation ensures your budget is in sync with your bank. When they match, you have confidence that your budget numbers are accurate and you can trust your available balances when making spending decisions.
Why Reconcile?
- Catch errors: Find duplicate, missing, or incorrectly entered transactions
- Verify accuracy: Confirm your budget balances match your actual bank balances
- Detect fraud: Spot unauthorized transactions or bank errors early
- Build trust: Confident budget numbers lead to better decisions
- Find pending transactions: Identify transactions you recorded but haven't cleared at the bank
- Peace of mind: Know your budget truly reflects your financial reality
Understanding Account Balances
Three Important Balances
1. Bank Balance (from your bank)
The actual balance your bank reports. This is what shows in your bank account right now, including cleared transactions only.
2. Budget Working Balance (in Purpose Budget)
All transactions in Purpose Budget, including uncleared ones. This is what your bank balance *will be* once pending transactions clear.
3. Budget Cleared Balance (in Purpose Budget)
Only cleared (✓) transactions in Purpose Budget. This should match your bank balance after reconciliation.
The goal of reconciliation: Make sure your Budget Cleared Balance equals your Bank Balance. If they match, your budget is accurate!
When to Reconcile
Recommended Schedule
- Monthly (minimum): Reconcile all accounts at the end of each month
- After bank statements: When you receive monthly statements from your bank
- Weekly (ideal): Quick reconciliation keeps you caught up
- Before major decisions: Verify balances before large purchases or transfers
Signs You Need to Reconcile
- Budget balance doesn't match bank balance
- You notice a missing or duplicate transaction
- Haven't reconciled in over a month
- Changed banks or account numbers
- Imported a large batch of historical transactions
The Reconciliation Process
Step-by-Step Reconciliation
- 1. Get your bank balance: Log into your bank and note the current cleared balance (or use your monthly statement)
- 2. Open reconciliation in Purpose Budget: Go to the account you want to reconcile and click "Reconcile Account"
- 3. Enter statement information: Input your bank balance and statement ending date
- 4. Mark cleared transactions: Go through your Purpose Budget transactions and mark each one that appears on your bank statement as cleared (✓)
- 5. Compare totals: Check if your Budget Cleared Balance now matches your Bank Balance
- 6. Investigate discrepancies: If balances don't match, find the difference (see troubleshooting below)
- 7. Finish reconciliation: When balanced, save/complete the reconciliation
- 8. Record reconciliation date: Purpose Budget marks this account as reconciled through this date
Marking Transactions as Cleared
What Does "Cleared" Mean?
A cleared transaction (✓) has posted at your bank - the money has actually left or entered your account. Uncleared transactions are pending, scheduled for future, or checks not yet cashed.
How to Mark Cleared
- During reconciliation: Check the box next to each transaction on your bank statement
- Anytime: Click the transaction and toggle the "Cleared" status
- Bulk marking: Select multiple transactions and mark all as cleared
- Automatic (Premium): Bank sync auto-marks imported transactions as cleared
Transactions to Mark Cleared
- Debit card purchases that posted
- Credit card charges that appear on statement
- Cashed checks
- ATM withdrawals
- Direct deposits
- Automatic bill payments that processed
Transactions to Leave Uncleared
- Pending debit/credit card transactions
- Checks you wrote but recipient hasn't cashed
- Future-dated transactions
- Scheduled automatic payments not yet posted
Finding and Fixing Discrepancies
When your Budget Cleared Balance doesn't match your Bank Balance, here's how to find the issue:
Common Discrepancy Causes
Missing Transaction
A transaction cleared at your bank but you never entered it in Purpose Budget.
✓ Solution: Add the missing transaction and mark it cleared
Duplicate Transaction
Same transaction entered twice in Purpose Budget (common with manual entry + bank sync).
✓ Solution: Delete the duplicate transaction
Wrong Amount
Transaction amount in Purpose Budget doesn't match the bank amount (typo or price change).
✓ Solution: Edit the transaction to match the bank amount
Uncleared Transaction Should Be Cleared
Transaction posted at bank but you forgot to mark it cleared in Purpose Budget.
✓ Solution: Mark the transaction as cleared (✓)
Cleared Transaction Should Be Uncleared
You marked a transaction cleared but it hasn't actually posted at the bank yet.
✓ Solution: Uncheck the cleared status
Bank Error or Fee
Unexpected bank fee, interest credit, or correction you didn't know about.
✓ Solution: Add new transaction for the fee/credit
Troubleshooting Strategy
- Note the difference amount: Is it exactly equal to a specific transaction amount? That's likely the issue.
- Check for recent transactions: Start with the last few days - recent activity is most likely to be wrong.
- Look for round numbers: $50, $100 differences often indicate missed ATM withdrawals.
- Compare statement line by line: Go through bank statement, checking off each in Purpose Budget.
- Check uncleared transactions: Old uncleared items might need to be marked cleared or deleted.
Pro Tip: If you can't find the discrepancy after 15 minutes, take a break. Fresh eyes often spot the issue immediately. Also, small differences under $1 might be rounding or timing - sometimes it's okay to accept and adjust.
Reconciliation for Different Account Types
Checking Accounts
Frequency: Weekly or bi-weekly (high transaction volume)
Tips:
- Reconcile after each paycheck to catch issues early
- Watch for uncleared checks over 30 days old
- Account for automatic bill payments
Savings Accounts
Frequency: Monthly (low transaction volume)
Tips:
- Check for interest credits
- Verify automatic transfers posted
- Usually quick - few transactions to verify
Credit Cards
Frequency: Monthly when statement arrives
Tips:
- Match to statement closing date, not current balance
- Pending charges won't be on statement - leave uncleared
- Verify payment transaction posted
- Check for annual fees, interest charges
Investment Accounts
Frequency: Monthly or quarterly
Tips:
- Focus on contributions and withdrawals, not value changes
- Account for dividend deposits
- May have management fees to record
Best Practices
Make It a Habit
- Set a recurring calendar reminder: First of the month for monthly reconciliation
- Start small: Reconcile your primary checking account first
- Do it regularly: Weekly reconciliation takes 5 minutes; monthly takes 30
- Don't skip months: Catching up after 3+ months is much harder
Stay Organized
- Keep bank statements accessible (digital or physical)
- Note reconciliation dates in Purpose Budget
- Record any adjustments and why you made them
- Save reconciliation reports for tax time
Use Bank Sync Wisely (Premium)
- Bank sync auto-marks imported transactions as cleared
- Reconciliation is faster but still necessary (catches sync gaps)
- Verify sync worked correctly during reconciliation
- Manual transactions still need cleared status updated
Reconciliation Without Bank Sync (Essential)
Essential users reconcile manually but the process is identical:
- Log into your bank and get cleared balance
- Compare to Purpose Budget cleared balance
- Go through bank statement, marking each transaction cleared
- Find and fix discrepancies
- Finish when balances match
Essential advantage: Manual reconciliation forces you to review every transaction carefully, which can increase budget awareness. Many budgeters prefer this hands-on approach for the financial mindfulness it creates.
What If Balances Never Match?
If you can't get balances to match after thorough checking:
Option 1: Adjustment Transaction
For very small discrepancies (under $5):
- Create an adjustment transaction for the difference
- Categorize to "Miscellaneous" or "Bank Adjustments"
- Add note explaining the reconciliation adjustment
- Mark as cleared
- Balances now match - reconciliation complete
Option 2: Reset and Start Fresh
For chronic reconciliation issues:
- Pick a starting date (today or first of month)
- Set Purpose Budget balance to match bank balance exactly
- Mark all transactions before this date as reconciled
- Moving forward, reconcile religiously
- Accept you won't fix historical discrepancy
Option 3: Professional Help
For significant ongoing issues:
- Contact Purpose Budget support for assistance
- Consider hiring bookkeeper to review and fix
- May indicate larger budgeting or tracking issues
Common Mistakes to Avoid
❌ Comparing Working Balance to Bank Balance
Always compare your Budget CLEARED balance to Bank balance. Working balance includes uncleared transactions.
❌ Not Accounting for Pending Transactions
Pending transactions at your bank won't be in cleared balance. Leave these uncleared in Purpose Budget.
❌ Skipping Reconciliation "Just This Month"
Missing one month makes the next month harder. Small errors compound into big discrepancies.
❌ Blindly Trusting Bank Sync
Even with automatic imports, reconcile to catch sync failures, duplicate imports, or missing manual transactions.
❌ Using Current Balance Instead of Statement Balance
For monthly reconciliation, use your statement ending balance, not today's balance (which includes new pending transactions).
Frequently Asked Questions
Q: How long should reconciliation take?
Weekly reconciliation: 5-10 minutes per account. Monthly reconciliation: 15-30 minutes per account. If it takes longer, you may have data quality issues or need to reconcile more frequently.
Q: Do I need to reconcile every account?
Yes, eventually. Start with your primary checking account, then add credit cards and savings. Investment accounts can be quarterly. The more accounts you reconcile, the more accurate your overall budget.
Q: What if I haven't reconciled in 6 months?
Don't panic! Start with your most recent bank statement and reconcile that month. Then work backward month by month if needed. Or, do a "fresh start" by matching today's balances and reconciling from now forward.
Q: Can I reconcile with just my bank's mobile app?
Yes! The app shows your current cleared balance. For thorough monthly reconciliation, download a PDF statement for line-by-line comparison. But quick weekly reconciliations work fine with just the app balance.
Q: Why is my cleared balance still different after marking everything cleared?
You likely have a missing transaction (at bank but not in budget), duplicate transaction (in budget but not at bank), or amount mismatch. Carefully compare your bank statement line by line with Purpose Budget to find it.
Q: Does bank sync eliminate the need for reconciliation?
No! Bank sync reduces manual work but doesn't replace reconciliation. You still need to verify sync worked correctly, catch any missed transactions, and mark manual entries as cleared. Reconciliation is your accuracy check.
Build Confidence in Your Budget
Regular reconciliation ensures your budget reflects reality. Spend 15 minutes a month verifying accuracy, and you'll have complete confidence in your budget balances when making financial decisions.