Bank Reconciliation
Bank reconciliation proves that what the ledger says about cash agrees with what the bank says, and explains every difference. It is the most basic financial control there is, and a surprising number of organisations do it in a spreadsheet.
Data in and out
- OUT Matched and unmatched items to General Ledger · dailyWithout it: The ledger and the bank never agree.
If you change this
It implies 4 topics across 2 modules, including Data & Analytics which you might not expect.
See the path ahead →How matching works
- 01
Import the statement
Load the bank statement for the period, automatically and on a schedule.
- 02
Automatic matching
System matches statement lines to ledger entries on reference, amount and date within tolerance.
- 03
Rules-based matching
Configured rules handle recurring patterns — bank fees, interest, merchant settlements, direct debits.
- 04
Suggested matches
Near-misses presented for a human to confirm or reject, and the decision teaches future matching.
- 05
Manual matching
Whatever remains is matched by hand, and each one is a candidate for a new rule.
- 06
Review and sign-off
The reconciliation is reviewed by someone who did not prepare it, and retained as evidence.
Reconciling items
- Unpresented payments: Issued but not yet cleared. Legitimate, but should age out quickly.
- Deposits in transit: Received and recorded, not yet credited by the bank.
- Bank-originated entries: Fees, interest and charges the bank applied that the ledger does not know about.
- Unidentified receipts: Money arrived with no remittance advice. A receivables problem surfacing in cash.
- Errors: Keying mistakes on either side. The only category that should be zero over time.
An ageing unreconciled item is the warning sign. A stale unpresented payment may be a payment that never actually went out, and an old unidentified receipt is cash the business owns but cannot attribute.
Controls
- Independence: The reconciler must not also process payments or receipts.
- Frequency: Daily for high-volume operating accounts, monthly at absolute minimum.
- Evidence of review: Reviewer sign-off captured in the system, not as an email saying it looks fine.
- Ageing thresholds: Items past a defined age escalate automatically rather than rolling forward.
Metrics and KPIs to track
Auto-match rate
Statement lines matched without human intervention.
Reconciliation completion time
Days after period end to a signed-off reconciliation.
Unreconciled items aged over 30 days
Count and value of stale differences.
Unidentified receipts
Value of cash received that cannot be allocated.
Adjusting entries raised
Corrections arising from reconciliation, by cause.