What Is Bank Reconciliation?

Bank reconciliation is the process of comparing your accounting records (general ledger) with your bank statement to identify and explain differences. This monthly task ensures your recorded cash balance matches the bank's records and catches errors, fraud, or timing mismatches before they compound.

Differences between your books and the bank statement are often harmless: outstanding checks (issued but not yet cleared), deposits in transit, or bank fees you haven't yet recorded. However, reconciliation also catches genuine mistakes—transposed numbers, duplicate entries, or unauthorized charges. Regular reconciliation is a critical control that protects your business and maintains accurate financial records.

The reconciliation process typically involves listing all transactions on the bank statement, matching them to corresponding entries in your accounting system, and noting any unmatched items. Once complete, your cash balance should match the bank's.

Example

Your accounting records show a cash balance of €10,600. The bank statement shows €10,200. Reviewing both, you find outstanding checks totaling €200, a deposit of €500 not yet shown by the bank, and a €100 bank fee you hadn't recorded. Adjusting the bank statement (+€500 deposit in transit, −€200 outstanding checks) brings it to €10,500. Adjusting your books (−€100 bank fee) brings them to €10,500 too—both sides now reconcile.

Finmap Integration

Finmap streamlines bank reconciliation by automating transaction matching and flagging discrepancies, reducing the manual work and the risk of errors in your financial records.