Bank Reconciliation: What It Is & Best Practices : PLANERGY Software

ABC Company’s bank statement for December reflects an ending balance of $46,125, while the ending balance in their general ledger account for December is $43,250. Both banking activity and all activity going into and out of the general ledger account are included in the bank reconciliation. Learn the essential criteria for determining who should manage your bank reconciliation to uphold financial integrity and prevent discrepancies.

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This leverages their direct involvement and oversight as a primary control. For some entrepreneurs, reconciling bank transactions creates a sense of calm and balance. If you’re in the latter category, it may be time to think about hiring a bookkeeper who will do the reconciling for you. Some businesses, which have money entering and leaving their accounts multiple times every day, will reconcile on a daily basis. A monthly or weekly BRS proves that you check your money records and take them seriously. If a payment goes missing or an unauthorized transaction shows up, spotting it early can make all the difference.

Clean records mean better cash control, which keeps your business safe from shortages. The reasons for preparing the bank reconciliation statement go beyond just correcting numbers. It plays a big part in ensuring your business stays safe, smart, and audit-ready. When your books are accurate and up to date, it’s easier to make informed decisions, prepare for tax time, and spot unusual activity.

First, check your two cash balances

By understanding and implementing bank reconciliation, you can keep polished financial records, detect any bookkeeping discrepancies, and ensure that your recorded cash balances are precise. For smaller companies, it’s common to reconcile bank statements during the monthly or quarterly close process. However, there are situations where a bank reconciliation might be necessary at the earliest. For example, if a business identifies any suspicious activity or unidentifiable transactions, it’s essential to prepare a bank reconciliation immediately. Similarly, if customer payment checks on the balance sheet do not match bank records, a cross-check is necessary.

This can range from one-off errors such as calculation mistakes or double payments to major concerns like theft and fraud. Meru Accounting understands the importance of financial reconciliation and offers comprehensive solutions to help businesses streamline the process. Our experienced accountants provide expert assistance in reviewing bank statements, identifying discrepancies, preparing Bank Reconciliation Statements, and ensuring the accuracy of financial records.

Failing to record all transactions:

With 200+ LiveCube agents automating over 60% of close tasks and real-time anomaly detection powered by 15+ ML models, it delivers continuous close and guaranteed outcomes—cutting through the AI hype. On track for 90% automation by 2027, HighRadius is driving toward full finance autonomy. Cash management software can integrate with many data sources, ensuring consistency in data requirements and quality. AI agents auto-match 95% of transactions, freeing teams to focus on actual anomalies. There is no need to make any adjustments on the bank side since those will likely happen during the next month. It may be possible to connect your ERP directly to your banks in an effort to automate some of this process.

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Traditionally, companies that use ERP software upload their bank statements, or bank feeds, into their ERP system and match the transactions manually line by line. By comparing your records with bank statements, suspicious activity such as unauthorized transactions, repeated errors, or other discrepancies can be detected early. Bank reconciliation is essential for safeguarding the accuracy of your financial data and improving decision-making. A key task within accounting, it’s often performed as part of the month-end close process.

Check if the bank deposits and withdrawals match the records on the balance sheet. If there are any differences between the bank statement and the balance sheet, cross-check to identify the mistake’s source. Modern treasury systems, like Atlar, are designed to integrate with both your banks and ERP system and push bank statements automatically (via direct feeds) into your cash ledger. This lets you automatically match transactions and flag discrepancies inside your ERP, which is especially helpful for higher transaction volumes or multi-currency operations. Many companies with a higher volume of transactions choose to invest in ERP software with a general ledger module, enabling them to centralize their transaction data in a single source of truth.

Omission error

Manual reconciliation can be time-consuming and error-prone, but tools like Sheetgo can automate and streamline this process. A reconciliation statement refers to the banking summary prepared by the banks to list down the bank’s account balances and compare the same with their internal records. The purpose behind preparing these statements is to detect the differences between the entries of the two statements and work on rectifying them. Most businesses should reconcile their accounts at least once a month, ideally right after the bank statement comes in.

Real-Life Examples That Show Why BRS is Prepared

• A bank reconciliation statement is a summary produced by a bank of a customer's recent banking activity, provided for purposes of comparison with the customer's internal records.
• These can create discrepancies between your bank statement and your cash book.
• Performing immediate bank reconciliations for large cash amounts or suspicious transactions further increases your ability to catch fraud and error.
• Bank accounts for businesses can involve thousands of transactions per month.
• Errors can also contribute to differences between the book and bank balances.

Identifying and correcting these errors is a key outcome of the bank reconciliation process. Account reconciliation is the broader process of verifying that your company’s accounting records match up with its financial statements. This can include reconciling accounts payable, accounts receivable, inventory, and other balance sheet accounts—not just cash. The goal is to ensure that every account in your general ledger accurately reflects the company’s financial position. The bank reconciliation process is one involving the comparison of data recorded in the company’s cash books with the corresponding information listed in the firm’s bank statements. All in all, this is an essential process for the finance department to make sure that the company always maintains an accurate and reliable accounting record.

Stops Duplicate or Missed Transactions

As a result, the bank statement may not reflect the deduction of these outstanding checks, leading to a discrepancy between the company's records and the bank statement. Failing to consider outstanding checks can create an inaccurate representation of available funds. When these records don't match – and they often don't due to timing differences and pending transactions – bank reconciliation helps explain why. For example, a check you've written might show in your records but hasn't yet cleared the bank, or a customer's deposit might appear in your bank statement but hasn't been recorded in your books. Some businesses, particularly those with high-volume financial transactions, may benefit from weekly or even daily ongoing reconciliations.

• It’s recommended for a company to perform a bank reconciliation at least once a month.
• The reconciliation of bank statements is a critical step in maintaining accurate financial records for any business, ensuring that the company’s accounting records are up-to-date and accurate.
• While monthly reconciliation is a minimum standard for most mid-sized companies, many teams with higher transaction volumes do it weekly or even daily.
• Regular bank reconciliations are a fundamental practice for businesses of all sizes, contributing to sound financial oversight.

By using Sheetgo, businesses can automate data import, comparison, and adjustments, reducing the risk of errors and saving valuable time. This allows accounting teams to focus on strategic financial planning rather than manual data entry. In October 2020, OpenGov, a US-based government software solution provider, introduced a new feature to automate the entire process of reconciliation. This announcement came following its acquisition of ClearRec and rebranding itself as OpenGovBank Reconciliation.

Similarly, a deposit made by the company and recorded in its books might not appear on the bank statement until the next business day. These timing variances are a normal part of financial operations and do not indicate errors. As a general rule of thumb, a bank reconciliation statement for every bank account ought to be prepared at regular intervals to make sure that an organisation’s cash records are truthful. Otherwise, the company may encounter lower-than-anticipated cash balances or, in the worst cases, overdraft fees and bounced cheques. On that note, bank reconciliation exercises are also a practical approach for businesses to formulate improved corporate governance policies and internal controls over cash payments and receipts. Thus, this practice is constantly a non-negotiable for the Chief Financial Officer’s (CFO) office, given its role in governing the accuracy of an entity’s accounting records.

You will need to review and adjust your bank statement and internal records to account for these discrepancies, giving you your adjusted (or calculated) bank balance and book balance respectively. Next, check for transactions on the bank statement that aren’t recorded in your books. These often include things like interest earned, automatic deposits, or bank fees. While your online statement might who should prepare a bank reconciliation? show one number, your actual cash position could be very different. Unprocessed transactions—like uncleared checks or pending deposits—can create financial blind spots, potentially leading to overdrafts or inaccurate reporting. Bank reconciliation is the procedure involving the comparison of data detailed in cash books against the corresponding information documented on bank statements.