Bank reconciliation

Bank reconciliation is the process of comparing the bank statement with what is recorded in finance or the ERP. Each receipt must match an open receivable and each payment a payable. Anything that does not match may be an unrecorded fee, a duplicate payment, a customer who paid a different amount or a typo.

How it works

Done by hand, reconciliation takes hours every week and usually runs late. Automated, it follows a routine: download the statement (via the bank’s API or an OFX/CSV file), match each line to invoices by amount, date and reference, settle matches automatically and list mismatches for a person to review. Finance then only looks at exceptions.

Practical example

A company with 600 receipts a month reconciled on Fridays, which took the whole afternoon. With a daily 8 am routine, 94% of lines are settled automatically and the month’s 30 to 40 mismatches arrive in a list suggesting which invoice should match.

Common mistakes

• Reconciling only at month end, when errors have piled up.
• Settling manually without recording the source, which hurts audits.
• Ignoring small fees and interest that distort the balance.