Monthly Bank Reconciliation: A Simple Step-by-Step Guide

Bank reconciliation means checking that the transactions in your accounting software match your bank statement. It is the simplest and most effective way to catch errors, missing entries and duplicates before they grow into bigger problems. Done monthly, it takes much less time than doing it once a year.

Why it matters

• It confirms your records agree with what the bank says you actually have.
• It catches duplicate, missing or wrongly categorised transactions.
• It highlights payments you did not expect, which can flag errors or fraud.
• It gives you reliable figures for reporting and for your accountant.

Step by step

1. Get your statement. Use the bank statement for the period, not just the live balance. If you use a bank feed, still check against the statement.
2. Check the opening balance. The balance at the start of the period should match last month's closing balance. If it does not, something changed in a past period.
3. Match every transaction. Work through the statement and match each line to a transaction in your software, such as a customer payment, a supplier payment or an expense.
4. Deal with anything unmatched. For items in the bank but not in your books, find out what they were and record them. For items in your books but not in the bank, check whether they are timing differences, such as a cheque not yet cleared, or errors.
5. Check for duplicates. Look for the same amount, date and payee entered twice, for example from a bank feed and a manual entry.
6. Compare the closing balance. Your reconciled balance should equal the statement's closing balance. If there is a difference, keep looking until it is zero.
7. Review and lock the period. Once reconciled, avoid changing earlier months without a good reason.

Do not forget the other accounts

Business current accounts are not the only ones to reconcile. Credit cards, savings accounts, loan accounts and payment platform balances all need to match their statements too.

Tips to make it easier

• Set a fixed date each month and treat it like any other appointment.
• Categorise transactions weekly so the month-end job is small.
• Keep receipts and invoices ready; see our guide to receipts and expense records.
• Use bank rules in your software for regular, predictable transactions.

When it has been months

If your bank account has not been reconciled for a while, you are not alone. It can be a sign the books need attention; see seven signs your books need a clean-up. Our Accounting Books Clean-Up includes bank reconciliation clean-up, and our ongoing support does it for you every month.

Why the balance does not match

When a reconciliation will not balance, the cause is almost always one of a short list of things. Work through them in order and you will usually find it:

• A transaction entered twice. Typically once from the bank feed and once manually. Sort by amount to spot pairs.
• A missing transaction. Bank charges, interest, direct debits and card fees are the usual suspects, because no invoice arrives to remind you.
• The wrong amount. Transposed digits (€540 instead of €450) produce a difference divisible by nine, which is a useful clue.
• The wrong date. A transaction recorded in the wrong period will make both months wrong.
• The wrong account. A payment recorded against the credit card instead of the current account.
• An edited past transaction. If a previously reconciled month now differs, something was changed after the fact.

Timing differences are not errors

Some differences are perfectly normal. A cheque you wrote may not have cleared, a customer payment may be in transit, or a card payment may take a day or two to settle. These are timing differences: the transaction is correctly recorded in your books, it has simply not reached the bank statement yet. They should clear in the following period. If one sits there month after month, it is no longer a timing difference and needs investigating.

Matching payments to invoices

Reconciling the bank is only half the job. A payment of €2,450 that matches the bank but is not allocated against the right customer invoices leaves your receivables wrong, even though the bank balances. The same applies to supplier payments, and to lump-sum payments that cover several invoices at once. Allocate as you go, and your aged receivables and payables stay meaningful.

A sensible monthly rhythm

1. Weekly, fifteen minutes: categorise new bank transactions and attach any receipts.
2. First week of the month: reconcile the previous month across every account.
3. Same session: review unpaid customer invoices and send reminders.
4. Same session: look at the Profit & Loss and Balance Sheet while the detail is fresh.

Done this way, reconciliation stops being a dreaded task and becomes a short monthly check that tells you your numbers can be trusted.

This article is general information for small businesses in Ireland. It is not tax, legal or financial advice, and rules, thresholds and deadlines change. Please check current guidance on revenue.ie or speak to your accountant about your own situation.