Bank reconciliation is the process of comparing the transactions in your accounting records with the transactions on your bank statement, and making sure they agree. It is the single most useful check you can run on your books.
Why it matters
- It catches mistakes: duplicates, wrong amounts and transactions recorded twice or not at all.
- It catches fraud: payments you do not recognise stand out.
- It keeps your cash figure honest, which every other report depends on.
- It means your year end is easy, because the hard work has been done all year.
How to reconcile, step by step
- Get the statement for the period, either as a downloaded file or from online banking.
- Compare the opening balance on the statement with the opening balance in your books. They should agree.
- Go through the statement line by line and match each to a transaction in your books: an invoice payment, a bill payment or another entry.
- For lines with no match, such as bank fees or interest, create the entry.
- Anything in your books that is not on the statement yet, such as a cheque that has not cleared, is an outstanding item.
- Check that the closing balances agree once the outstanding items are accounted for.
Why balances do not agree
- A transaction is missing from your books.
- A transaction has been entered twice or with the wrong amount.
- A payment has been recorded but has not cleared the bank yet.
- A statement period is missing.
- The opening balance was entered wrongly.
Making it quick
Modern accounting software cuts the work dramatically. You import the statement, it suggests matches against your open invoices and bills, and rules handle the repeating items such as subscriptions and bank charges. A weekly session of fifteen minutes beats a monthly marathon. In AvrioBooks you can import a statement, accept suggested matches and let bank rules clear the routine lines.
How often?
At least monthly, and weekly if you have a lot of transactions. The longer you wait, the harder it is to remember what each line was.
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