The hidden cost of "Plugging" Bank Reconciliations
When Bookkeeping Goes Wrong: The Hidden Cost of “Plugging” Bank Reconciliations
Most small business owners assume their books are fine as long as the software shows everything “reconciled.” But after years in property management, where I regularly inherited messy portfolios; I learned a hard truth: A green checkmark doesn’t mean the books are accurate.
In fact, some of the worst financial messes I’ve ever seen were technically “reconciled.” And the biggest culprit? Plugged bank reconciliations.
When Bookkeepers and or Accountants take Shortcuts
If you’ve never seen a plugged reconciliation, here’s what it looks like:
The bank rec doesn’t balance
The bookkeeper can’t find the difference
Instead of investigating, they enter a “plug” amount to force it to match
The software shows a perfect reconciliation
The underlying errors remain buried
On the surface, everything looks fine. Underneath, the books are drifting further away from reality.
I’ve taken over portfolios where this went on for two full years.
Two years of:
Unresolved discrepancies
Duplicate transactions
Missing entries
Incorrect opening balances
GST amounts that didn’t match actual activity
Unresolved deposits
By the time year‑end rolled around, the “quick fix” had turned into hours sometimes days of untangling.
Why Plugs Are So Dangerous
A plug doesn’t solve a problem. It hides it. And once a plug is entered, every future reconciliation is built on top of that error. The longer it goes on, the harder it becomes to trace the original issue.
Here’s what I’ve seen firsthand:
Insurance expenses that don’t match the policy
Premiums coded incorrectly, renewals missed, or payments split across random categories.Loan balances that don’t match lender statements
A plug hides the fact that principal and interest weren’t recorded properly.GST filings that don’t match actual sales
When reconciliations are inaccurate, GST becomes a guessing game and that’s a risk no business should take. This can also lead to CRA audits which no business owner wants.Year‑end accountants spending extra hours (and charging extra fees)
Because they have to unwind every shortcut taken throughout the year.Business owners making decisions based on incorrect numbers
Which is the most dangerous consequence of all. Revenue could be over stated which could lead to poor financial decisions
What Proper Oversight Actually Looks Like
When I step into a messy set of books, the first thing I do is slow everything down. Accuracy before speed.
That means:
Reviewing every reconciliation
Matching every transaction to source documents
Correcting opening balances
Removing plugs and identifying the real discrepancies
Reviewing past financial statements
Ensuring insurance, loans, GST, and credit cards tie to actual statements
Rebuilding a clean, reliable financial picture
Creating working papers to make sure everything ties to what it should
It’s not glamorous work. But it’s the work that protects a business. And once the cleanup is done, monthly oversight prevents the problem from ever happening again.
Why This Matters for Small Business Owners
Most business owners don’t realize how much damage a rushed or inexperienced bookkeeper can cause. They trust the green checkmark, they trust the software, they trust that “reconciled” means accurate. But bookkeeping isn’t data entry. It’s financial oversight. When oversight is missing, errors compound quietly in the background until tax season exposes everything.
The Bottom Line
If your books have ever felt “off,” or if you’ve switched bookkeepers and something doesn’t look right, it’s worth taking a closer look. A plugged reconciliation might seem like a small shortcut, but it can snowball into a major cleanup project.
When your books are clean, it makes everything easier further down the road.
