How to reconcile a bank account, step by step
A bank reconciliation proves your books match reality. Here is the monthly process, the differences to expect, and how to let AI do the matching.
What a reconciliation actually proves
A bank reconciliation confirms that the cash balance in your ledger equals the bank statement once you account for timing and errors. It is the single most important control in a small business close, because an unreconciled cash account can hide missing deposits, duplicate payments, or fraud.
Reconciliation identity
Bank balance − outstanding checks + deposits in transit = adjusted ledger balance
When both sides agree after these timing adjustments, the account is reconciled. A residual difference means an error or omission on one side.
The monthly reconciliation steps
- 1Pull the bank statement and the ledger cash account for the same period.
- 2Tick off every transaction that appears on both sides.
- 3List outstanding checks written but not yet cleared.
- 4List deposits in transit recorded in the ledger but not yet on the statement.
- 5Investigate anything left unmatched - bank fees, interest, or a posting error.
- 6Post adjusting entries for fees, interest, and corrections, then confirm the balances agree.
Differences you should expect
| Difference | Which side | Fix |
|---|---|---|
| Outstanding check | Bank lags ledger | Leave as reconciling item until it clears |
| Deposit in transit | Bank lags ledger | Leave as reconciling item until posted |
| Bank fee or interest | Ledger missing it | Post an adjusting journal entry |
| Transposed amount | Ledger error | Correct the ledger entry |
| Duplicate payment | Ledger or bank | Investigate and reverse if wrong |
How Fintra automates the match
Fintra pulls transactions through bank feeds and lets AI match them to ledger entries automatically, so you review exceptions instead of ticking every line. What used to be a multi-hour monthly task becomes a short review of the handful of items that did not match cleanly.
- Bank feeds import cleared transactions daily so nothing is entered by hand.
- AI proposes matches between statement lines and ledger entries; you approve or correct.
- Unmatched items surface as exceptions with the likely reason attached.
- Every reconciliation carries a sign-off and timestamp for the audit trail.
Frequently asked questions
How often should I reconcile my bank account?
At minimum monthly, as part of the close. Many teams reconcile weekly or continuously through bank feeds so errors and fraud surface within days rather than at month-end. The more often you reconcile, the smaller each review is and the faster your close runs.
What causes a bank reconciliation to not balance?
Usually a timing difference - an outstanding check or deposit in transit - or a missing entry such as a bank fee or interest. Genuine errors include transposed amounts, duplicate payments, or a transaction posted to the wrong account. Working through unmatched items one at a time isolates the cause.
Can bank reconciliation be automated?
Yes. With bank feeds and AI matching, most transactions reconcile automatically and only exceptions need a human. You still review and sign off, but instead of ticking hundreds of lines you confirm a short list of unmatched or unusual items, which is where errors actually hide.
What is the difference between a deposit in transit and an outstanding check?
Both are timing differences. A deposit in transit is money you recorded as received but the bank has not posted yet. An outstanding check is a payment you recorded but the recipient has not cashed. Each appears on your ledger before the bank statement and clears within a few days.
Stay in the loop
One practical finance briefing a week - new guides, checklists, and benchmarks.
Reconcile by exception, not by hand
Fintra matches bank feeds to your ledger with AI so you only review what did not match. Free to start.
Talk to us