Bank reconciliation steps

Bank reconciliation happens when you compare your record of sales and expenses against the record your bank has. It’s how you verify your business accounting numbers.

1. Get bank records

You need a list of transactions from the bank. You could get that from a statement, from online banking, or by having the bank send data straight to your accounting software. If you run a current account and a credit card account, you’ll need both statements.

2. Get business records

Open your ledger of income and outgoings. This might be in a logbook, on a spreadsheet, or in an accounting software package. Some accounting software will pull in bills and receipts with the help of data capture tools and extract the data automatically.

3. Find your starting point

Find the last time the balance on your business books was the same as the balance in your bank account. Start the reconciliation from there.

4. Run through bank deposits

Make sure each deposit appears as income in your accounts. If something is missing, enter it. You’ll need to figure out if it was a sale, interest, a refund, or something else.

5. Check the income on your books

Each entry should match a deposit on your bank statement. If something is missing, find out why. A customer payment might have bounced, for example.

6. Run through bank withdrawals

All bank withdrawals should be recorded in your books. This includes things like bank fees, which you might not have accounted for yet.

7. Check the expenses on your books

Each entry should match a withdrawal on your bank statement. If not, find out why. One of your payments may not have cleared yet, or maybe you paid using cash or a different account.

8. End balance

After you’ve checked all the deposits and withdrawals, your business bank balance should match the totals in your business accounts. This will be the starting point for your next reconciliation.