How to Reconcile Your Bank Statements: Step-by-Step

Reconciling your bank statements is a crucial process to ensure your business records match your bank’s records, helping you spot errors, prevent fraud, and maintain accurate financial data . Here’s how to do it:

1. Gather Your Records

Collect your business’s cash account records (from your general ledger or accounting software) and your bank statement for the same period.

2. Compare Opening Balances

Check that the opening balance on your bank statement matches the opening balance in your records for that period. If they don’t match, investigate previous reconciliations for errors.

3. Match Transactions

Go through each transaction on your bank statement and match it to your business records. Look for:

• Deposits

• Withdrawals

• Checks written

• Electronic payments

• Bank fees

Tick off each transaction as you match them.

4. Identify and Investigate Discrepancies

If you find transactions on your bank statement that aren’t in your records (or vice versa), investigate:

• Outstanding checks: Checks you’ve written that haven’t cleared yet.

• Deposits in transit: Money you’ve received and recorded but hasn’t yet appeared on the bank statement.

• Bank errors or unauthorized transactions: Contact your bank if you spot anything suspicious.

  
  

5. Adjust Your Records

Make necessary adjustments in your records for:

• Bank fees or interest not yet recorded

• Errors in your books

• Any legitimate transactions missing from your records

6. Confirm Ending Balances

After adjustments, your records’ ending balance should match the ending balance on your bank statement. If they don’t, repeat the process to find the discrepancy.

7. Document and File

Keep a record of your reconciliation, including notes on any discrepancies and how they were resolved. This documentation is important for audits and future reference.

Why Reconcile Regularly?

• Detect errors and fraud early

• Ensure accurate financial reporting

• Maintain cash control and avoid overdrafts

By following these steps, you’ll keep your business finances accurate and up to date, making tax time and financial planning much easier.