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Clearing Account Reconciliation Frequency

How Often Should You Reconcile Clearing (or Balance) Accounts​

A clearing account (also called a balance account) is a temporary account used to hold transactions until they are transferred to the correct accounts. For example, you might use a Shopify balance account to track pending deposits until the funds hit your bank.

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To ensure the accuracy of your financial records, it is important to reconcile your clearing accounts on a regular basis. Learn more about the benefits and recommended frequency of account reconciliation here.

The frequency of reconciliation depends on the volume of transactions processed through clearing accounts. It's generally recommended to reconcile clearing or balance accounts at least monthly. However, for high transaction volumes, weekly or even daily reconciliations may be necessary.

Regularly reconciling clearing accounts helps identify errors and discrepancies, such as missing or duplicate transactions. Addressing these issues promptly improves the accuracy of financial reports, enabling better-informed decisions based on your company's financial data.

Reconciliation Formula​

When reconciling monthly (or for whatever period you choose), you can use this formula:

Opening balance

(+) Increases from funds coming in or completed sales

(-) Deductions from refunds or fees

(-) Transfers out (e.g. to your bank account)

(=) Ending Balance

The calculated ending balance should match what the source system (Stripe, Shopify, etc.) reports at the end of the period.

What can go wrong if clearing accounts are not reconciled at least monthly:​

If you do not reconcile your clearing accounts at least monthly in your accounting system, several issues may arise:

Inaccurate Financial Statements​

Clearing accounts temporarily hold transactions for allocation. Irregular reconciliation leads to unnoticed errors and discrepancies, resulting in inaccurate financial statements.

Missed Transactions​

Without regular reconciliation, improperly allocated transactions may be missed, leading to incomplete records and errors in tax reporting.

Fraud and Theft​

Lack of regular reconciliation makes detecting fraudulent transactions difficult, increasing the risk of fund manipulation or theft.

Compliance Issues​

Inaccurate financial records can violate regulatory standards, risking penalties or legal action.

Time-consuming Investigations​

Irregular reconciliation complicates identifying and fixing errors, wasting valuable business time and causing unnecessary stress.

Regularly reconciling your clearing or balance accounts is essential for maintaining accurate financial records, detecting fraud and errors, and ensuring compliance with regulatory standards.