Everything you need to know about the bank reconciliation process

Bank reconciliation is a process that consists of comparing the accounting notes that a company has recorded in the books of the extracts from its current accounts and the adjustments that the bank itself makes on the same account. This is a non-mandatory process, but it is very advisable for any company. Its objective is not to match the bank balances that the company has registered with the extracts of those accounts, but to clearly identify what has generated the difference.

We speak of a process highly recommended for all companies because it is quite common that the balance of bank accounts and bank statements do not coincide with business books. With this procedure we managed to keep a clear, reliable and transparent accounting.

Bank reconciliation

Steps to follow:

1. Compilation of the necessary documentation. First, we need the bank to provide us with an extract of the month or period we want to reconcile, as well as the accounting book for that same period. We also need the prior reconciliation document, so we can review past balances and pending adjustments.
2. Checking between accounting notes and bank information. The second step is to make the reconciliation. If done manually, we will start by checking the starting and ending balance, and if we see that there is a difference, we will review and verify the movements. Even so, there are currently tools that digitize and automate this procedure, so that it is done much faster and without errors.
3. Generation of the report. The third step is to record all the process information in a report or conciliation document, which will be archived for a month-to-month follow-up. Whether we do the process manually or automated, it is advisable to keep a record of the reconciliations, as it is possible that a difference in the balances will be solved within one or several months of having occurred.
4. Making the necessary adjustments. This last step is not part of the bank reconciliation exactly, since the objective is to identify the differences of the registered values, but it is part of the logic of the process. Once the disks are detected, the necessary adjustments are made: the accounting notes that were not included in the accounting book of the company are made, errors are corrected in amounts or concepts, or duplicate notes are deleted.