Up to date bookkeeping can add a tremendous amount of value to your small business.  At any point in time you can gauge your businesses financial health and track how you are meeting your goals.  One useful piece of information to use as part of your financial health checking is a bank reconciliation.

What is a Bank Reconciliation?

A bank reconciliation is used to confirm that the cashbook (or bank nominal ledger) is being maintained correctly. On a regular basis items on the cashbook should be ticked off to the bank statements and any differences noted.  The difference between the balance on the cash and the bank statement are reconciling items and should be investigated.

What is the main reasons for preparing a bank reconciliation?

The cashbook should be updated as and when payments and receipts are expected to be made.  The main reasons for preparing a bank reconciliation are:

  • To check the accuracy of the cashbook;
  • To perform a review of reconciling items and that money in coming in and going out as expected.

How often should a bank reconciliation be done?

The frequency upon which a bank reconciliation is carried out depends partly on the business and number of transactions.  But ideally maintaining your financials, including a bank reconciliation, on a weekly basis for a small business will keep books up to date and help keep an eye on anything unexpected and manage your cashflow.

Why is a bank reconciliation important for a small business?

Not only is a bank reconciliation a check that the bookkeeping is being carried out correctly, it can help with day to day cash management.

Suppose a customer promises to pay you and you log this on your cashbook accordingly.  However the customer doesn’t actually pay you, then this will appear as a reconciling item for you to investigate. By carrying out a regular bank reconciliation this missed payment will be bought to your attention, helping your to further manage your cashflow.

Business Bank Reconciliation Template

Download our business bank reconciliation template.  In this bank reconciliation example it deomostrates that because a customer did not pay the business bank account was in overdraft.  By carrying out a simple bank reconciliation exercise it shows why the bank account was overdrawn and gives the information needed to resolve the situation.

Business Bank Reconciliation Template Example