What is Bank Reconciliation?
Bank reconciliation is the process of comparing your internal financial records (checkbook register, accounting software, or bookkeeping ledger) against the transactions listed on your bank statement to ensure they match.
This critical accounting task helps you identify discrepancies, catch errors, detect fraud, and ensure your financial records accurately reflect your true cash position.
Why Bank Reconciliation Matters
Detect Errors
Catch bank mistakes, duplicate transactions, or incorrect amounts
Prevent Fraud
Identify unauthorized transactions or suspicious activity quickly
Accurate Records
Ensure your books match reality for financial reporting
Cash Flow Management
Know your true available balance for business decisions
Step-by-Step Bank Reconciliation Process
The manual reconciliation process below can take hours per account. Zera Books' AI-powered automation eliminates the most time-consuming step—manual data entry—by instantly extracting all transactions from PDF statements into clean Excel/CSV format, reducing reconciliation time by up to 90%.
Gather Your Documents
Collect everything you'll need before starting:
- Bank statement for the period you're reconciling
- Your internal records (checkbook register, accounting ledger, or software)
- Previous month's reconciliation (for reference)
- Any pending transactions or outstanding checks from previous months
Compare Opening Balances
Your bank statement's opening balance should match last month's ending balance.
If they don't match: Review last month's reconciliation for unreconciled items. These might include outstanding checks or deposits in transit that need to be carried forward.
Match Deposits
Compare all deposits on your bank statement against your internal records:
- Check off each deposit that appears in both records
- Verify amounts match exactly (watch for transposed numbers)
- Note any deposits in transit (recorded by you but not yet on the statement)
Match Withdrawals and Payments
Compare all withdrawals, checks, debit card transactions, and automatic payments:
- Check off each withdrawal that appears in both records
- Verify check numbers and amounts
- List outstanding checks (written but not yet cleared)
Account for Bank Fees and Interest
Add any bank charges or interest earnings that appear on the statement but not in your records:
• Monthly maintenance fees
• ATM fees
• Overdraft charges
• Wire transfer fees
• Interest earned on the account
Record these in your books to keep them current.
Calculate the Adjusted Balance
Adjust both your records and the bank statement to arrive at the true balance:
Your Records:
Book balance: $5,432.18
+ Interest earned: $2.50
- Bank fees: $12.00
= Adjusted balance: $5,422.68
Bank Statement:
Statement balance: $6,122.68
+ Deposits in transit: $250.00
- Outstanding checks: $950.00
= Adjusted balance: $5,422.68
The adjusted balances should match. If they do, your reconciliation is complete!
Document and File
Keep a record of your reconciliation:
- Save a copy of the reconciliation worksheet
- Note any outstanding items to carry forward
- File the bank statement with your financial records
Skip the Manual Data Entry
Steps 3-5 typically consume 80% of your reconciliation time. Zera Books' AI extracts all transactions from any bank's PDF statement in seconds, giving you clean Excel/CSV files ready for direct import into QuickBooks or Xero.
Try for one weekCommon Reconciliation Issues and Solutions
Balances don't match after reconciliation
Common causes:
- • Transposed numbers (e.g., $123.45 recorded as $132.45)
- • Missing transactions in your records
- • Duplicate entries
- • Math errors in running balance calculations
Solution: Go line by line through both records. Use a calculator to verify your running balance. Divide the difference by 9—if it divides evenly, you likely have a transposition error.
Can't find a specific transaction
Common causes:
- • Transaction dated differently than expected
- • Merchant name differs from what you recorded
- • Transaction processed on a different account
Solution: Search by amount rather than description. Check previous and next statements in case the transaction posted in a different period.
Outstanding checks from months ago
Common causes:
- • Check was lost or never cashed
- • Payee forgot to deposit it
- • Check stopped or cancelled
Solution: Contact the payee after 90 days. After 6-12 months, consider voiding the check and adjusting your records (check state escheatment laws first).
Eliminate Transaction Matching Errors
Most reconciliation errors stem from manual data entry mistakes. Zera Books uses AI trained on millions of financial documents to extract transactions with 99.6% accuracy—no more transposed numbers, missing entries, or duplicate transactions.
Automate your reconciliationBest Practices for Efficient Reconciliation
Reconcile Monthly
Don't wait—reconcile as soon as you receive each statement. The longer you wait, the harder it becomes to remember transactions and track down discrepancies.
Use Accounting Software
QuickBooks, Xero, and similar tools automate much of the matching process and calculate adjusted balances for you. Pair them with Zera Books' AI-powered transaction extraction and categorization to eliminate manual data entry entirely.
Maintain Good Records
Record all transactions promptly with clear descriptions. Save receipts for major purchases.
Review Unusual Transactions
Investigate any large, unexpected, or duplicate charges immediately rather than during reconciliation.
Separate Business and Personal
Never mix personal and business transactions in the same account—it makes reconciliation exponentially harder.
Key Takeaways: Bank Reconciliation Essentials
Related Resources
Best Bank Reconciliation Software
Compare top tools for automating reconciliation
Bank Statement Converter
Extract transactions from any PDF statement
Bank Reconciliation Solution
Automate reconciliation workflows
AI Transaction Categorization
Auto-categorize for QuickBooks and Xero
QuickBooks Bank Reconciliation
Step-by-step QuickBooks reconciliation guide
Bank Statement to QuickBooks
Convert statements for QuickBooks import
Month-End Close Automation
Speed up your closing process
Pricing
Unlimited conversions for $79/month
Reconcile Monthly Minimum
Never let more than 30 days pass without reconciling active business accounts.
Segregate Duties
The person reconciling should never be the same person handling cash or issuing checks.
Record All Adjustments
Create journal entries for bank fees, interest, NSF checks, and errors discovered during reconciliation.
Document Everything
Keep bank statements, reconciliation worksheets, and supporting documentation for audit purposes.
Use Systematic Approaches
Apply the divide-by-9 and divide-by-2 rules to quickly identify common error types.
Address Outstanding Items
Follow up on checks outstanding for 90+ days and investigate unusual deposits or withdrawals.
Consider Automation
For high transaction volumes, automated reconciliation saves hours and reduces error rates.
Complete Within 10 Days
Reconcile within 10 business days of receiving your statement to minimize delays and errors.
