Bank reconciliation is a common and reliable technique for verifying your bookkeeping quickly and efficiently. It is simply the process of comparing figures from your accounts against those shown on a bank statement. Ideally these figures should be identical. Any transactions found in the accounting records but not on the bank statement are said to be outstanding. If such a discrepancy has occurred you will be able to investigate further and identify any miscalculations or misunderstandings.

Bank reconciliation should be implemented into any effective bookkeeping system. It enables businesses and individuals to limit common accounting errors, including: cheques recorded as a lesser or higher amount than was presented to the bank; money received but not recorded or deposited at the bank; or even payments taken from the bank account without prior knowledge. Fraud is an ongoing risk for a company particularly as it grows in size and stature, thus vigilance in routine tasks such as bank reconciliation is an effective countermeasure and deterrent.

As previously stated this is a simple but often overlooked aspect of bookkeeping. After the cause of any discrepancy has been rooted out, and the correct adjustments have been made to the balance of the accounts, the two adjusted balances should agree. If they are the same, you have reconciled the bank statement, and saved yourself a considerable amount of undue stress and confusion by doing so.