Bank reconciliation is the process of checking that the transactions in your bank account matches with your accounting.
Your bank statement and your bookkeeping should look the same. If you have an accountant they’ll ask for your bank statement to do your bank reconciliation.
How often do I do a bank reconciliation?
It varies from business to business how often you should do it, but as a rule of thumb, the more often you do it, the less issues you’ll have or the quicker it will be to resolve those issues since you don’t have to look through as many transactions at a time.
If you have a small business—or you operate as a freelancer or contractor—it might be enough to do it every 6 month or every year, but larger businesses should do it at least once a month.
How to spot the most common errors in a bank reconciliation
So what do you do when your bank statement doesn’t match your accounts? Most likely, it’s just a simple case of you forgetting to record a transaction or of entering the wrong numbers. It’s usually easy to correct, but it might take some time to find the error. We recommend using the elimination method.
The bank statement is your guideline, so your accounting should be changed to match it. Here’s what you should check against your bank statement, in this order:
1. Check bank and card fees
These amounts are usually small, but they should be recorded in your accounts so that your bookkeeping is 100 percent correct. Some banks charge a monthly fee, while others charge a yearly fee.
2. Check for you find a matching amount
Go through the bank statement to see if you can spot an amount that matches the discrepancy. If so, it’s simply a case of forgetting to record this transaction.
3. Check for transactions that didn’t actually occur
This might sound strange, but when you’re bookkeeping it’s easy to record something one too many times or to enter it in the wrong month.
