Bank Reconciliation

A business’s financial outlook determines whether it runs sustainably or plunges into crisis. Therefore, earmarked funds must leave a proper trail of usage, which should reflect in the financial books and statements. Reconciliation helps balance the financial books at the end of a fiscal period and is a fundamental thing every business should do.

Bank reconciliation service ensures the money earned or spent mirrors what enters an account or leaves at the end of a fiscal period. That helps monitor cash outflows and inflows properly.

This article delves into bank reconciliation and everything you need to know about this essential process.

What Is a Bank Reconciliation Statement?

A better bank reconciliation definition is that it’s technically a cross-checking process summarizing the banking and business activity. It’s a fundamental process that determines whether or not these activities match an entity’s bank account. It ensures that the records, including check registers, balance sheets, and general ledger accounts, are correct.

Understanding what bank reconciliation means is handy for new businesses. It’s quite an intricate but essential process ensuring the finances balance, pointing out possible fraudulent activity and errors. The reconciler must justify every difference in the bank statements and ensure that the recorded amounts and those shown in the bank compare.

You need a conclusive monthly, quarterly or annual financial statement to complete bank reconciliation. Moreover, your business books will help you compare, making bookkeeping one of the essential financial activities in a business.

Common Bank Reconciliation Problems

It’s typical to encounter potential errors and miscalculations when reconciling a bank statement. That can raise questions and, sometimes, a suspicion that money spent or allocated hasn’t been put to best use.

However, that’s quite standard for any business, and it shouldn’t make you fret. Please remember that dealing with finances isn’t a piece of cake, and such mistakes are somewhat invited.

The only concern, however, would be how much it affects a business in terms of the scale of damage. The good thing is that issues requiring reconciliation aren’t overly profound and can be a minor glitch.

Typical issues that may call for a bank reconciliation in accounting include:

Bank statement showing something that’s not in your business booksUsually, in this case, it’s possible making an error when recording a transaction. Or perhaps, you could have unknowingly omitted it, leading to dents in the financial reports.

That should prompt a bank reconciliation on QuickBooks or, perhaps, any proficient software. However, it shouldn’t always be a problem if the amounts in question are insignificant. Regardless, that shouldn’t mean you shouldn’t be proactive enough.

  • Business books don’t reflect what’s in the bank statement

While bank statements could show errors and imbalances, sometimes, it’s the other way around. If you forget to bank an income, pay for something with cash, or use a different account, there’s an incredible chance of misbalances.

Bank Reconciliation Procedure

Bank reconciliation is quite a process and requires utmost precision. However, it gets better with a proper financial management plan.

As mentioned, bank reconciliation in accounting identifies potential faults, whether intentional through fraudulent activities or, perhaps, unfortunate. Therefore, using the bank reconciliation formula helps you swiftly evaluate and balance the books and financial statements.

Here’s the bank reconciliation process.

Obtain the Bank Financial Records

Your bank account’s financial statements are a facet of bank reconciliation. They provide every transaction information, including the amount used and the dates they occurred. Financial statements are only a part of what you need. As such, you can liaise with your bank to provide you with one.

You must specify the transactional period you want to reconcile since that can be monthly, quarterly, or annually. Your bank should offer these in-person or online. Either way, these statements should indicate your transactions during that period.

Get Your Financial Books in Place

Remember that you’re comparing the records in your books and the banks. Therefore, it helps to have your business’s books in order. That should include all ledger and financial books, mainly present in an accounting program, logbook, or spreadsheet.

Proper bookkeeping helps guarantee a seamless process and eliminates the hassle of the bank reconciliation process. Besides, properly storing your business’s financial books, where they can’t get lost or tampered with, makes them available.

Choose a Starting Point

Having a proper starting point helps eliminate confusion. Perhaps starting from where your books are balanced last can help you get things more organized.

Some reconcilers can start from anywhere and mark them out, which is feasible. However, that can make things trickier and less seamless if the entries are innumerable.

Check the Withdrawals and Deposits

While cross-checking, ensure that you skim through the withdrawals and deposits. Also, add any missing financial record entries to make the process more seamless. It’s good, at this point, to ensure t that all financial records are accounted for in the bank statement to make the process seamless.

Check the Income and Expenses in the Books

Ensure that every transaction is accounted for by comparing the books and the bank statement. Theft and fraud aren’t alien to businesses since they occur quite regularly. Perhaps a missing record can give you a much-needed lead on such acts.

But misdoings aren’t always the reason for imbalances. Pending payments or mistakes can occur, leading to potential errors and imbalances.

Adjust the Bank Statements

Bank errors and deposits that haven’t yet been reflected can fail to accurately mirror a company’s transactions. Therefore, adjusting the bank statements can come in handy for a more precise picture of what’s going on with the finances.

Fine-Tune the Cash Balance

Besides adjusting the bank statement, your cash balance should also need to reflect your business’s transactions accurately. You can cross-check the deposits and all charges to ascertain that all transactions are correct.

Once everything seems in place, you can compare the end balances after matching the records. The end balances must be the same, bringing the process to a close.

Bank Reconciliation Template: A Business Scenario

To help you understand better, here’s a bank reconciliation with example.

We can assume that a company deposits $20,000 and writes five checks totaling $10,000. Moreover, it also makes a $4,000 deposit in the bank’s night depository, and the company’s cash account shows a positive debit balance of 14,000.

The problem, however, is that the bank statement, at the time of the reconciliation period, reads 11,950. This amount is less than the $14,000 reported in the cash account.

This scenario, therefore, calls for reconciliation. So, let’s assume that:

  • The $4,000 the company made doesn’t show in the bank statement.
  • One of the five checks the company wrote with an amount of $2,000 doesn’t appear on the bank statement.
  • The bank statement displays a bank service fee of $50. However, the cash account doesn’t show that.

Here’s the solution to reconcile the bank statement and the company’s cash balance.

The company needs to agree to adjust the amount and align it with what the bank statement indicates. The cash account balance should also show the bank’s $50 service fee. Therefore, subtracting this fee from the cash account’s balance, the adjusted amount should be $13,950. (that is, $14,000 – $50)

The bank statement’s value of $11,950 must be increased by $4,000 (for the deposit) and decreased by $2,000 (for the missing check out of the five).

$11,950 + $4,000 – $2,000 = $13,950.

This bank reconciliation excel template is only of the best context bank reconciliation examples and solutions. And from the look of things, the company’s cash account and bank statement read $13,950. That means that the bank reconciliation is successful.

Importance of Bank Reconciliation

Bank reconciliations happen quite regularly in businesses and companies for viable reasons. Ideally, the principal aim is usually helping to balance the books and matching transactions, ensuring that they’re in tandem with the records and bank statements.

However, this process’s importance is more profound and includes the following.

To Validate Data Entry – Since data entry can be strenuous, there is a high possibility of errors and entry mistakes. However, reconciliation helps point out these mistakes, including duplicate entries, keying in the wrong amounts, or other errors.

To Identify Possible Fraud – Something fishy may go on in a business and, possibly, fraud. It could happen in bank reconciliation outstanding checks or other financial records and can be crippling. In bank reconciliation, outstanding checks are deductions from the bank balance, which can happen without you knowing.

Therefore, reconciliation points them out, identifying duplicate checks or those issues without authorization. Besides, it also identifies other ill motives, including missing cash deposits.

Minimize and Control Theft – Your business’s employees can steal from your coffers, but reconciliation helps identify possible faults, making you more proactive.

For Accurate Tax Reports – Mistakes from your side or bank do occur and can be a headache for your tax reporting. Banks don’t may hardly make these errors, but you shouldn’t rule out that possibility either. If so, reconciliation can be handy to help make accurate tax reports.

Benefits of Outsourcing Your Bank Reconciliation

The benefits of outsourcing your bank reconciliation services equal the importance of this crucial process. However, the key advantage is that it helps alleviate the burden and hustle of keeping the records in place. Here’s why you need to outsource your bank reconciliation.

Identifying Fraudulent Activities

Professionals understand the tricks that happen inside businesses. Remember that fraud can cripple or compromise your business operations, especially since huge sums vanish in thin air and can’t be recovered.

Reconciliation solves the puzzle from the inside out, identifying ghost tenders or payments made to illegitimate workers and employees. Doing the reconciliation yourself is okay, but involving a professional makes the process efficient and easy.

Keeping Your Business’s Deposits More Accurate

Regular bank reconciliation helps keep you in the loop of your finances. Remember that your business makes essential financial decisions based on the funding in your account.

Planning for payments and procurement depends on how much you have in your cash account makes reconciliation essential. You don’t want to procure tenders and fail to pay them back because your cash account deluded you with non-existent, huge cash sums.

Keeping your business’s deposits accurate helps you make more targeted decisions to avoid altercations with the entities offering support services in your business. And no one’s better to help you with that than a qualified professional.

Eliminate Accounting Errors

Truthfully, proficient banks hardly make mistakes, but you shouldn’t rule that possibility, either. Possible mistakes include transferring an incorrect amount or recording an incorrect check amount. Also, your bank can enter a duplicate transaction or an amount in the wrong bank account without you being aware.

However, outsourcing bank reconciliation services help keep you in the know, identifying possible accounting errors without raising your finger.

What’s Included in Our Bank Reconciliation Service?

We include a vast array of professional support in our bank reconciliation service. Our qualified professionals at Mr. Accountant have the experience and quality to meet every corporate’s bank reconciliation standards.

So, what are bank reconciliation services we offer?

  • Full and partial reconciliation
  • Check sequencing
  • Reviewing every issued, deposited, cleared, or canceled checks
  • Reconciling your internal financial records with the bank statements
  • Creating bank reconciliation reports
  • Reconciling bank statements with your business’s records, and many more.

Why Outsource Bank Reconciliation Services to Us?

We’re avid and keep a keen eye for detail, balancing the records in your business. Our team isn’t just proficient but ensures that they help you with every essential accounting detail. Also, as a bookkeeping service, we ensure that every financial record gets a booking, making reconciliations quite a breeze.

Moreover, we understand our customers and always work towards helping them excel by giving them a clearer picture of their financial capacity. If you’re looking to outsource bank reconciliation services, Mr. Accountant is your go-to option.


Bank reconciliation is an integral accounting process every business needs to ensure a better financial understanding and capacity. It’s part of better accounting to help businesses realize their goals and grow. The good thing is that you’re not alone dealing with the numbers and intricacies since Mr. Accountant comes to your aid and helps you keep your business in the right balance.

Software Expertise