Put simply, it’s a check of your business accounts against your bank statements.  The two sets of records should agree with each other, but if that is not the case, you will need to find out why and correct any errors.  This guide explains why a bank reconciliation is important and answers some of the common questions people ask us.

What’s the point?

Regular bank reconciliation provides a number of benefits for your business including:

• Catch payment errors and fraud – spot incorrect payments or suspicious activity
• Find and fix bookkeeping errors – identify mistakes and correct them
• See how my business is performing – regularly checked financial data helps you keep track of some key business performance measures
• Ensuring your financial statements reflect the true financial position of your business
• Be ready for tax filing dates – a fully reconciled record of income and spend will make your tax returns easier and faster

Bank reconciliation FAQs

Q – Does everything need to match 100%?

A – Your bank account in your business accounting software must mirror what is shown on your bank statements, so the short answer is “yes”.  Any mismatches should be checked to see what caused them as this could help eliminate future errors.

Q – Why are some transactions missing?

A – There can sometimes be a delay or ‘lag’ in transactions appearing on your bank statement. So if it’s a recent transaction, say within the last week, don’t worry. If the transaction is older than that, then it probably needs investigating to find out why it hasn’t appeared.  Other missing items could be bank fees or interest payments.

Q – How often should I do a reconciliation?

A – This is entirely up to you, but bear in mind that the longer you leave it between reconciliations, the bigger the job!  If you are using accounting software that submits data to HMRC within the Making Tax Digital (MTD) programme, you should complete a reconciliation before the data is sent, but we generally recommend at least a weekly reconciliation.  If you have a lot of transactions in your business you might want to consider doing it more often, even daily.

Q – Can it be done online?

A – There is nothing wrong with a manual, paper-based reconciliation, but it can be a bit tedious and does require more hard copy files!  Some business owners have built their own spreadsheets for their bookkeeping which are also fine to use.  However, most banks will now send transaction data to online accounting software systems like Xero which can really speed up the process. Our next business guide, “How to do a Bank Reconciliation” takes you through the process in 8 easy to follow steps.

Q – What steps should I take after reconciling my bank statement?

A - After completing a bank reconciliation, you should update your financial records to reflect the reconciled balance, ensuring any errors are corrected.  This will improve the accuracy of your financial records going forward.

For more information on Bank Reconciliations, online accounting software or any other business matter, please call us on 0121 474 2683, This email address is being protected from spambots. You need JavaScript enabled to view it., or visit our web page on business accounting.