How to Do Bank Reconciliation: A Step-by-Step Guide

What Is Bank Reconciliation?

Bank reconciliation is the process of comparing your internal accounting records with your bank statement to make sure they match. Discrepancies reveal errors, missing transactions, bank charges you didn't account for, or — in worst cases — fraud.

It's one of the most fundamental financial controls in any business, and it should be done at least monthly.

Why Bank Reconciliation Matters

Without regular reconciliation:

You might assume you have more (or less) money than you actually do

Errors in your books can go undetected for months and compound

Small fraudulent transactions can slip through unnoticed

At year-end, your accountant has to do months of reconciliation work — at your expense

With regular reconciliation, your books are always accurate and up to date, and problems are caught when they're small and fixable.

The Step-by-Step Process

Step 1 — Gather Your Records

You need two things:

Your bank statement for the period (download from your bank's online portal)

Your accounting records for the same period (all income received and expenses paid)

Step 2 — Start With the Opening Balance

Confirm that your accounting records show the same opening balance as your bank statement. If they match, great. If they don't, last month's reconciliation was incomplete — resolve that first.

Step 3 — Match Transactions

Go through each transaction on your bank statement and find the corresponding entry in your accounting records:

Bank credits (money in): match to invoices marked as paid, loan receipts, transfers in

Bank debits (money out): match to recorded expenses, bills paid, payroll, transfers out

Tick off each transaction when it matches.

Step 4 — Identify Unmatched Items

After matching, you'll typically find a few items that don't match:

In the bank statement but not in your records:

Bank charges or interest you haven't recorded

Payments received that you haven't logged

Direct debits you forgot to account for

Erroneous charges (requires follow-up with your bank)

In your records but not in the bank statement:

Outstanding cheques you issued but the recipient hasn't cashed

Invoices you've marked as paid but the payment hasn't cleared yet (timing difference)

Payments in transit

Step 5 — Make Adjusting Entries

For legitimate items in the bank statement that aren't in your records (bank charges, new income received), record them now. These are real transactions that need to be in your books.

For items in your records but not the bank statement, these are typically timing differences — they'll appear next month. No action needed yet unless they're very old.

Step 6 — Reconcile

After adjusting, your accounting balance should match your bank statement balance. If they match — you're reconciled. If they don't — there's still an error somewhere. Common culprits: transposition errors (entering $1,890 instead of $1,980), duplicate entries, or a transaction missed entirely.

How Often Should You Reconcile?

Monthly minimum. This is the standard for most small businesses and gives you a clean set of books at month-end.

Weekly for high-volume businesses. If you have dozens of transactions per day, weekly reconciliation catches errors before they're buried in volume.

Daily for retail or cash businesses. If you handle cash or have very high transaction volumes, daily reconciliation is the only way to catch discrepancies promptly.

Bank Reconciliation in Quotation Expert

Quotation Expert includes a bank accounts module where you can record all transactions against specific accounts and reconcile them. Receipts from clients, bill payments to suppliers, and expense payments can all be assigned to bank accounts — so your reconciliation has all the data it needs in one place.