Bank reconciliation: a practical process for growing companies

A bank balance tells you what is in an account. It does not tell you whether the books explain every receipt and payment. Bank reconciliation connects those two records, so a missing fee or an unrecorded customer receipt does not pass into the next report unnoticed.

For a growing company, the useful outcome is a short list of explained differences, with an owner for anything unresolved. It is a repeatable finance process, rather than an exercise in making two totals agree.

What is bank reconciliation?

Bank reconciliation compares the transactions and balance on a bank statement with the corresponding bank account in the accounting records, for the same date and currency. Differences are investigated and documented. The books are corrected where necessary; genuine timing differences remain on the reconciliation until they clear.

For example, a payment recorded in the books on Friday may reach the statement on Monday. That can explain a difference at Friday's close. A bank fee missing from the books needs a different response: record the charge with the appropriate evidence and review the coding.

What you need before you start

• The complete bank statement for the period, including opening and closing balances.
• The accounting ledger for that bank account and the same period.
• The last approved reconciliation and its outstanding items.
• Access to invoices, payment references and other supporting records.

Reconcile each account separately, including foreign currency accounts. A transfer between two company accounts must appear on both sides. It is not revenue simply because it arrives as a credit on one statement.

A six-step bank reconciliation process

1. Check the starting point. Confirm that the opening balance agrees with the previous reconciliation. Resolve an old unexplained difference before adding new transactions.
2. Match receipts and payments. Use the reference, amount, currency and date together. Similar amounts alone are weak evidence.
3. Check grouped and partial payments. A card processor may settle several sales after deducting fees. A customer may pay only part of an invoice. Preserve the link between the settlement and the underlying items.
4. Investigate unmatched lines. Separate missing entries, duplicate entries, timing differences and items needing clarification. Record who will investigate each one.
5. Post reviewed corrections. Add missing charges or correct mistakes with the supporting document and the normal approval process. Do not create an unexplained adjustment just to force agreement.
6. Review and retain the reconciliation. Show the balances, the reconciling items, the evidence and the review date. Revisit outstanding items in the next cycle.

A worked example

The following figures are illustrative. At month end, the bank statement shows £24,850 and the ledger shows £25,000. The bank charged a £50 fee that has not been recorded. A £100 customer receipt was also posted twice in the ledger.

Item	Effect on the ledger balance
Balance before review	£25,000
Record missing bank fee	−£50
Reverse duplicate receipt	−£100
Corrected balance	£24,850

Both differences require a supported correction. Neither is an outstanding timing item. If a legitimate payment had been recorded before appearing at the bank, it would instead need to be listed separately until it cleared.

How often should you reconcile?

Choose a cadence that matches transaction volume and the decisions relying on the figures. A business handling many daily receipts may need daily matching and frequent exception review. Another may work through exceptions weekly, with a formal reconciliation at month end. A bank feed makes data available sooner; it does not replace the review.

Give each unresolved item an age and an owner. An unexplained transaction carried forward repeatedly deserves attention even when its value is small. The aim is to prevent an ageing list from becoming part of the normal close.

What should software do, and what should people check?

Bank reconciliation software can import transactions, suggest matches and flag exceptions. A reviewer still needs to check unusual matches, settlements, missing documents and corrections. Ask whether you can see why a match was proposed, undo it and trace it back to its evidence.

Cifrova combines financial operations software with an assistant and a controller. The scope and cadence are agreed with the company, alongside its accountant. You can check the connected banks and see how the service works.

What comes after reconciliation?

A reconciled bank account is one part of a reliable month-end close. It does not prove that every expense belongs in the correct period or that every customer will pay. Those questions belong in the wider review and the monthly management accounts.

If the same differences return each month, bring a sample of the exception list to a conversation with Cifrova. It is a useful starting point for deciding which part of the process needs attention.