How to Reconcile Bank Statements

To reconcile bank statements, compare your internal cash records with the bank’s statement to ensure accuracy. This process involves matching deposits, payments, outstanding checks, and bank-only transactions like fees or interest. When you identify discrepancies early, you can maintain accurate financial data, avoid errors, and protect your business against fraud.

Gather All Necessary Records

Before starting the reconciliation, collect:

• The latest bank statement
• Your company’s general ledger or cash book
• Records of outstanding checks and deposits
• Any bank fees, interest charges, or service charges

Example: If your business bank statement shows a balance of $25,000 on June 30, make sure you have the same period’s internal cash balance for comparison.

Compare Opening Balances

Check that the opening balance in your bank statement matches the opening balance in your books for the same period.

• If they don’t match, it may indicate an error in the prior reconciliation.
• Correct any issues before proceeding with the current reconciliation.

Match Deposits

Go through each deposit listed in the bank statement and match it with your internal records.

• Mark deposits that appear in both records.
• Note any deposits in your books that don’t appear on the bank statement, these are likely deposits in transit.

Example: If your books show a $5,000 deposit on June 28 but it isn’t in the June bank statement, it will appear in the July statement. Mark it as “deposit in transit.”

Match Payments and Checks

Compare all checks and payments in your records with those cleared by the bank.

• Mark cleared checks and payments.
• Identify outstanding checks that haven’t yet cleared.
• Watch for duplicate or incorrect entries.

Tip: Use check numbers to make the process faster and more accurate.

Record Bank Transactions Not in Your Books

Banks may record items that don’t yet appear in your books, such as:

• Bank fees (service charges, overdraft fees)
• Interest earned
• Returned checks (NSF checks)

Record these in your internal ledger so both balances align.

Adjust for Errors

If there are errors in your books or on the bank’s side:

• Correct book errors immediately (e.g., misrecorded payment).
• Contact the bank if you find bank errors.

Example: If you accidentally recorded a $320 payment as $230, correct your books by adjusting $90.

Calculate the Adjusted Balance

Now update your cash balance in the books with:

• Add: Deposits in transit
• Subtract: Outstanding checks
• Subtract/add: Any errors corrected

The adjusted balance should equal the ending balance on the bank statement.

Reconcile Regularly

Reconcile at least monthly,  ideally when your bank issues its statement. Regular reconciliation helps prevent fraud, detect errors quickly, and keep your financial records trustworthy.

Example Bank Reconciliation Table

Bonus Tip: Automate with QuickBooks + DepositFix

If you’re using QuickBooks, integrations like DepositFix can streamline reconciliations, as it syncs online payments and invoices directly with your accounting system. This reduces manual entry, eliminates errors, and speeds up monthly reconciliations.