How to Do a Bank Reconciliation: Step-By-Step Process


At times, you might give standing instructions to your bank to make some payments regularly on specific days to the third parties. For instance, insurance premiums, telephone bills, rent, sales taxes, etc are directly paid by your bank on your behalf and debited to your account. As mentioned above, bank overdraft is a condition where a bank account becomes negative as a result of excess withdrawals over deposits. Contact us if you have more questions about bank reconciliation or to apply for a small business loan. Our alternative funding experts can help you find the best financing options for your business goals.

  • When you record the reconciliation, you only record the change to the balance in your books.
  • This process helps you monitor all of the cash inflows and outflows in your bank account.
  • ReconArt integrates seamlessly with any external and external data source and system – ERPs, GL modules, accounting systems, banking feeds, etc.
  • If you’re searching for accounting software that’s user-friendly, full of smart features, and scales with your business, Quickbooks is a great option.

Bank reconciliation is not a ledger itself, but rather a process or a tool used to ensure the accuracy and consistency between a company’s bank account records and its own accounting records. To start with, businesses can adopt bank reconciliation templates to match bank statements with the cash book. Spreadsheet-based bank reconciliation template is free and easy to use.

What is a bank reconciliation statement?

However, the bank reconciliation process can be time-consuming and prone to errors. Probably because many accounting clerks still do it manually on printed hard copies or in excel spreadsheets using filtering, search or vlookup functions at best. That approach used to work when bank transactions were relatively few and produced simple one-to-one matches. Account reconciliation is part of this verification and double-checking process. It compares internal records with third-party statements and data to check if both corresponding data sets line up. If not, this indicates potential violation of the fundamental accounting principles for preparing the accounts (accuracy, completeness, timeliness, or else) and the discrepancy requires explanation.

  • For doing this, you must add deposits in transit, deduct outstanding checks and add/deduct bank errors.
  • Let’s look into how we can streamline the process using tools and strategies.
  • Adjust the cash balances in the business account by adding interest or deducting monthly charges and overdraft fees.
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In the case of personal bank accounts, like checking accounts, this is the process of comparing your monthly bank statement against your personal records to make sure they match. Many banks allow you to opt for fee-free electronic bank statements delivered to your email, but your bank may mail paper bank statements for a fee. Add the amount of deposits in transit and subtract the amount of any outstanding checks from your bank statement’s cash balance to arrive at (and record) an adjusted bank balance.

Obtain copies of and compare pertinent records

It is even better to conduct a bank reconciliation every day, based on the bank’s month-to-date information, which should be accessible on the bank’s web site. By completing a bank reconciliation every day, you can spot and correct problems immediately. The very purpose of reconciling bank statements with your business’s cash book is to ensure that the balance as per the passbook matches the balance as per the cash book. All deposits and withdrawals undertaken by the customer are recorded both by the bank as well as the customer. The bank records all transactions in a bank statement (also known as passbook) whereas the customer records all their bank transactions in a cash book.


Similarly, add any interest payments or bank fees to your business’s cash accounts to find your adjusted cash balance. A bank reconciliation statement is a document that compares the estate or trust cash balance on a company’s balance sheet to the corresponding amount on its bank statement. Reconciling the two accounts helps identify whether accounting changes are needed.

Benefits of automated bank reconciliations

These adjustments help you know how much money you really have in your accounts. It’s important for managing your money and keeping your financial records right. This ensures everything matches up and helps you find any mistakes that need to be considered. Bank service charges are fees the bank charges for various services they provide, such as monthly maintenance or overdraft fees. Bank service fees can affect your account balance and must be accounted for during reconciliation. All you need to do bank reconciliation is a copy of your business accounts and a list of bank transactions from the same time period.

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How do I conduct Bank Reconciliation?

If there are differences, investigate and resolve them to ensure that the records are accurate, complete, and within the financial reporting framework. Some businesses, which have money entering and leaving their accounts multiple times every day, will reconcile on a daily basis. HighRadius’ Account Reconciliation software helps you leverage an out-of-the-box matching rule system, and analyze large volumes of data with accuracy, thereby reducing reporting errors. Our goal is to give you the best advice to help you make smart personal finance decisions.