Bank Reconciliation
Matching bank statements with internal records to identify discrepancies.
Bank reconciliation compares your internal accounting records against your bank statement to ensure they match. Differences arise from outstanding checks, deposits in transit, bank fees, interest earned, and errors. Reconciling monthly (or more often) catches unauthorized transactions, bank errors, and bookkeeping mistakes before they snowball.
Example
During monthly reconciliation, a business owner finds a $500 discrepancy caused by an outstanding check that hasn't cleared and a $12 bank fee not yet recorded in the books.
Why It Matters for Your Business
Regular bank reconciliation is the most basic financial control—skipping it allows errors, fraud, and unauthorized charges to go undetected.
Practical Tips
- •Reconcile every bank account at least monthly, ideally within the first week after statement close.
- •Investigate and resolve every discrepancy immediately rather than letting them accumulate.
Related Terms
More Banking Terms
ACH
Automated Clearing House - an electronic network for financial transactions.
APR
Annual Percentage Rate - the yearly cost of borrowing including fees.
APY
Annual Percentage Yield - the real rate of return on savings including compound interest.
Business Checking
A bank account designed for business transactions.
Line of Credit
A flexible loan allowing businesses to borrow up to a limit as needed.
Related Financial Guides & Resources
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