Bank Reconciliation Best Practices

Bank reconciliation compares the cash recorded in the accounting system with the balance reported by the bank, and explains every difference between the two. Done consistently, it is one of the most effective controls a business has: it surfaces missing transactions, duplicate entries, bank charges and potential fraud before they compound.

Reconcile often, not just at month-end

Waiting until the end of the month to reconcile makes differences harder to trace. For businesses with high transaction volumes, reconciling weekly — or even daily — keeps the work manageable and catches issues while they are still fresh.

Explain every difference

A reconciliation is only complete when the opening book balance, the bank balance and the closing position all tie out with each difference identified. Typical reconciling items include:

• Deposits recorded in the books but not yet cleared by the bank.
• Payments issued but not yet presented.
• Bank charges, interest and direct debits not yet recorded in the books.
• Errors in either the books or the bank statement.

Investigate stale and unusual items

Reconciling items that persist from month to month deserve attention. An uncleared payment that is several months old, a receipt that never arrived, or a charge that cannot be identified should be investigated and resolved, not carried forward indefinitely.

Keep segregation of duties where possible

Where the size of the business allows, the person who records transactions should not be the only person reviewing the reconciliation. An independent review — even a brief one — adds a meaningful layer of control.

Retain the evidence

Keep the reconciliation, the supporting bank statement and notes on any unusual items. A clear reconciliation file makes period-end review, audit support and handovers far simpler, and demonstrates that the control is operating as intended.