The Touchstone

Long before anyone had a lab, gold buyers kept a small black stone on the counter.

You'd bring in a ring or a coin you swore was real. The buyer would draw it across the stone and leave a thin, bright streak. Then one drop of acid.

Brass fizzes and disappears. Gold just sits there.

That's the acid test, the one the saying comes from. It never mattered how the piece looked or what you said about it. The stone had the last word.

Your books have a stone too. It's your bank statement.

QuickBooks will show you whatever it's been told. Anyone with the login can type in a deposit or delete a check, and every report will agree with them. The bank statement is different. Nobody in your business wrote it. The money either arrived or it didn't.

So before I look at profit or taxes in anyone's books, I check one thing: does QuickBooks agree with the bank? When it does, everything built on top of it holds, from the tax return to the loan application. When it doesn't, all of that is standing on a guess.

I'm Rodrigo. I keep QuickBooks for small businesses across Hawaii.

Most of these posts end with an assay. That's the old word for proving a metal is what it claims to be. Here it means a test you can run on your own business in under half an hour, with an answer you can see for yourself.

Here's the first one.

Try It: The Five-Minute Touchstone

1. Take your most recent bank statement. Note the last date it covers and the ending balance.
2. In QuickBooks, run a Balance Sheet for that same date and find your checking account.
3. Put the two numbers side by side.

They don't have to match to the penny to pass. A check you wrote a few days before the statement closed, that hadn't been cashed yet, shows in QuickBooks but not at the bank. So does a deposit made on the statement's last afternoon. Add up anything like that. If it closes the gap, your books passed.

If a gap is left, its size tells you something.

If it's small and oddly specific, like $43.18, it's usually one transaction. Search QuickBooks for that exact amount. If nothing turns up, search for half of it, because a deposit entered as a payment throws the balance off by twice its size. And if the gap divides evenly by 9, two digits were probably swapped somewhere, a 54 typed as 45. It's one of the oldest tricks in bookkeeping.

If it's big, or you couldn't find the number at all, don't panic. It means nobody has held your books up to the stone in a while, and it's the most common thing I see. Every other number in QuickBooks stands on this one, so it's the right place to start.

P.S. The black cat on the website is Iao. He supervises the bookkeeping. He has never once reconciled anything.