If you only do one bookkeeping task properly, make it the bank reconciliation. It's the check that proves your books are complete, and it catches errors, missing invoices and even fraud before they become expensive.
What a bank reconciliation is
A bank reconciliation compares the balance in your accounting records with the balance on your bank statement on the same date, explains every difference, and corrects your books where they're wrong. When it's done, the closing balance in your books equals the bank, and you know why.
How to reconcile, step by step
- Get the bank statement for the period and note the closing balance.
- Tick off matching items: every bank line that matches a recorded transaction.
- Record what's missing from your books: bank charges, interest, direct debits, receipts you didn't know about.
- Investigate what's missing from the bank: payments and deposits recorded in your books but not yet on the statement.
- Fix errors: duplicates, wrong amounts, wrong accounts.
- Prove it: adjusted book balance = adjusted bank balance.
- Save the reconciliation and lock the period.
A worked example
| Item | AED |
|---|---|
| Balance per books, 31 October | 48,200 |
| Less: bank charges not yet recorded | −150 |
| Add: customer transfer not yet recorded | +3,150 |
| Less: card-machine fees deducted by the bank | −200 |
| Corrected book balance | 51,000 |
| Balance per bank statement, 31 October | 53,500 |
| Less: supplier payment sent 31 Oct, clears 1 Nov | −4,000 |
| Add: cheque deposited 31 Oct, credited 2 Nov | +1,500 |
| Adjusted bank balance | 51,000 |
Both sides agree at AED 51,000, so the account is reconciled.
Common differences you'll find
- Bank charges and fees, including transfer and card-machine fees
- Timing differences: payments and deposits in transit at month-end
- Payment gateway and marketplace payouts arriving net of fees: record the gross sale and the fee separately
- Foreign currency: different exchange rates on the invoice and the receipt
- Duplicate entries from bank feeds and manual entry
- Unidentified receipts: find out who paid and why before recording them
Reconcile everything, not just the main account
- Every current and savings account
- Every credit card
- Payment gateways (Stripe, Network International, Telr and others) and marketplace balances
- Petty cash: count it
Why it matters
- VAT: missing sales or duplicate purchases change your VAT return.
- Corporate Tax: your profit is only as reliable as your reconciled books.
- Cash: you see your real cash position.
- Fraud: unexplained payments surface quickly. See Bookkeeping Fraud: 9 Warning Signs.
Bank reconciliation is the heart of the month-end close. See The Bookkeeping Process and Month-End Closing Checklist.
Every account reconciled, every month
We reconcile all your bank, card and payment-gateway accounts monthly and flag anything that doesn't match.