Bank reconciliation is a completeness check, not a tick-box exercise

A bank reconciliation answers one question: does the cash in my books match the cash the bank says I have, and if not, why?

It is the most valuable half-hour in the close, because the bank statement is the one record in your accounting that a third party produced. Everything else is your own assertion. The statement is evidence.

The shape of it#

You start with the closing balance on the statement and work toward the balance in the ledger, explaining each difference:

• Outstanding payments — cheques written or transfers initiated that the bank has not processed. In your books, gone; at the bank, still there.
• Deposits in transit — money received and recorded that has not cleared.
• Bank-side items you did not know about — service charges, interest, returned payments, currency conversion differences. These are not reconciling items so much as transactions you have not entered yet.
• Errors — on either side, and both happen.

The first two are timing. They resolve themselves next period, and a reconciliation full of them is healthy. The third is not a difference at all; it is missing bookkeeping, and the fix is to enter it. The fourth is the one worth slowing down for.

What a stale reconciling item means#

An outstanding payment that has been outstanding for six months is not a timing difference any more. Either the cheque was never presented — in which case it may need to be voided and the liability reinstated — or it was recorded twice, or it never existed.

The same is true in the other direction. A deposit in transit that never arrives is either a recording error or, occasionally, money that went somewhere it should not have.

Why the ledger balance is the one that matters#

The bank tells you what cleared. The ledger tells you what you committed to. For deciding whether you can afford something, the ledger balance is the honest one, because it already accounts for the cheques you have written and the deposits you are waiting on.

Businesses that run off the bank balance are, in effect, spending money twice — once when they commit it and again when they see it still sitting in the account.

Automated feeds change the work, not the obligation#

A bank feed pulls transactions in automatically, which removes the typing. It does not remove the reconciliation, and it introduces two failure modes of its own.

Duplicates. A transaction imported by the feed and also entered manually appears twice. The feed does not know they are the same event.

Gaps. Feeds break. A connection that silently stops for a fortnight leaves a hole in the ledger that nothing flags, because the absence of a transaction looks exactly like a quiet period.

The reconciliation is what catches both. It is the control that proves the feed did its job, which is precisely why "the feed handles it" is not a substitute.

Doing it more often than monthly#

The case for reconciling weekly is not tidiness. It is that a difference is easiest to explain while you still remember the week it happened in. A three-month-old unexplained deposit is archaeology; a three-day-old one is a question you can answer from memory.

It also shortens the close. Most of the work in a month-end bank reconciliation is the accumulated backlog, not the reconciliation itself.

What it feeds#

Once cash is reconciled, the rest of the close can proceed on the assumption that the ledger is complete — which is exactly what the close sequence depends on. Reconcile after posting accruals and you will be reconciling twice.

Comma's bank review is built around this order: transactions come in, get categorised against real accounts, and the reconciliation confirms nothing is missing before the period closes.