Reconciliation is what makes your cash figure trustworthy. Without it the number is a guess.
Bank reconciliation compares your own cash records with the bank statement. It catches typing errors, unauthorized transactions, and timing differences such as uncleared checks and deposits in transit. Every business needs it.
Why it matters
Skip it and your cash balance can drift from reality for months. That throws off forecasts, payroll planning, and any covenant you have with a lender.
It also catches fraud early. An unexpected withdrawal or an altered payee name stands out when you match line by line.
The steps
Start with the bank's closing balance and your ledger cash balance on the same date. List the deposits in transit and the uncleared checks that explain the gap.
Match cleared transactions one to one. Flag duplicates, missing entries, and amounts that do not agree.
- Check the statement and ledger cover the same period
- Match cleared deposits and withdrawals
- Adjust for uncleared checks and deposits in transit
- Investigate and document anything left over
Differences you should expect
Bank fees, interest and automatic transfers usually reach the statement before your books. Post those adjusting entries as you find them.
Payroll runs and card settlements often straddle a month end. Use the cutoff reports from your processor to line the timing up.
Tools and controls
Bank feeds speed the matching up, and a person still has to review. A suggested match should not skip approval on anything large or unusual.
If the team is big enough, keep reconciliation separate from whoever initiates payments. Lock a period once it is reconciled.
Written by the team at Ambivo, a business platform that keeps CRM, accounting and ERP on one customer record. This article is general guidance on the topic rather than a description of Ambivo features.