How to reconcile bank statements

Half one: is the statement data complete?

Before matching anything, make sure the transactions you are working from are exactly the ones on the bank statements. Data retyped from PDFs, pasted from a PDF, or exported by a tool you can’t check can be missing a row or carry a wrong sign. If it is, the reconciliation can never balance, and you’ll spend hours looking in the wrong place.

Three checks prove the statement data:

1. Running balance on every row. Previous balance + money in − money out = printed balance. A failure points to the exact row. See what a running balance check proves.
2. Opening to closing. Opening balance + total in − total out = closing balance.
3. Statement to statement. Each closing balance equals the next opening balance, with no gaps in dates.

StatementToCSV runs all three as it converts. With several statements in the converter above, it also explains any difference across the year.

Half two: match the statement to your records

1. Start from agreed balancesYour records’ opening balance for the period should equal the statement’s opening balance. If it doesn’t, fix the previous period first.
2. Tick off matching itemsMatch each statement transaction to an entry in your books or accounting software, by amount and date.
3. List what’s leftItems in your books but not on the statement are usually timing differences: cheques not yet cleared, or receipts not yet banked. Items on the statement but not in your books need entering: bank charges, interest, direct debits you forgot.
4. Prove the closing balanceStatement closing balance, adjusted for timing differences, should equal your records’ closing balance exactly.

In Xero, QuickBooks, FreeAgent or Sage

Accounting software does half two for you, matching imported statement lines to transactions. It can only be as good as the statement lines it was given. If you import from converted PDFs, check them first; see the accounting import guides.

When it won’t balance

Look for: a transaction entered twice, a transaction entered with the sign reversed (the difference will be twice its amount), a transposition error (a difference divisible by 9), or a period imported twice. Our guide to finding a missing transaction covers these in detail.