{"id":30854,"date":"2025-08-27T21:58:19","date_gmt":"2025-08-27T21:58:19","guid":{"rendered":"https:\/\/www.trintech.com\/?p=30854"},"modified":"2025-10-28T09:06:49","modified_gmt":"2025-10-28T09:06:49","slug":"what-is-reconciliation-in-accounting","status":"publish","type":"post","link":"https:\/\/www.trintech.com\/blog\/what-is-reconciliation-in-accounting\/","title":{"rendered":"Guide to Effective Reconciliation in Accounting"},"content":{"rendered":"
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Guide to Effective Reconciliation in Accounting<\/h1>\n

Blog post<\/p>\n <\/div>\n

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What Is Reconciliation in Accounting?<\/h2>\n\n\n\n

Reconciliation is the process of comparing two sets of financial records\u2014typically a company\u2019s general ledger and the company\u2019s bank statements\u2014to ensure both are complete and consistent. Should reconciliation reveal discrepancies, they must be tracked down and reconciled. Businesses typically reconcile their books on a monthly, quarterly or annual basis. Though the more frequently they engage in reconciliation the better.<\/p>\n\n\n\n

The Essence of Account Reconciliation<\/strong><\/h4>\n\n\n\n

Businesses rely on the account reconciliation process to ensure the viability of their financial records and the integrity of their accounts, to detect fraud, and to ensure the quality of their accounting. That said, there is more than one method of account reconciliation.<\/p>\n\n\n\n

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Why Is Regular Account Reconciliation Important?<\/h2>\n\n\n\n

For a company to be able to make reliable forecasts, create accurate budgets and satisfy the needs of stakeholders, they must have reliable financial information. This is where reconciliation comes in.<\/p>\n\n\n\n

But if you only engage in quarterly or even annual reconciliation, you make it easier for nefarious players to engage in undetected fraud and for systemic errors to create cash flow issues that undermine day-to-day business activities.<\/p>\n\n\n\n

For those reasons, monthly reconciliation is recommended. If you do not have the accounting resources to dedicate to manual reconciliation every month, automated reconciliation solutions, like Trintech\u2019s<\/a> can save vast amounts of time, reduce errors and increase transparency.<\/p>\n\n\n\n

The Role of Reconciliation for Businesses<\/h4>\n\n\n\n

Maintaining accurate financial records can help a business in a variety of important ways, including preventing fraud, ensuring you don\u2019t pay more than your share of tax, helping to secure funding from investors, more accurate budgeting, and maintaining good relationships with suppliers.<\/p>\n\n\n\n

When it comes to suppliers, late payments are a sure-fire way to erode trust and damage these key relationships. Frequent reconciliation enables you to always have an accurate account of your finances so you can pay invoices promptly and with a high degree of confidence. Automated reconciliation software<\/a> can help ensure prompt payments which, in turn, solidifies your status as a reliable customer.<\/p>\n\n\n\n

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How to Perform Reconciliation in Accounting: Step-by-Step<\/h2>\n\n\n\n

At its heart, account reconciliation involves comparing information in the general ledger against monthly statements issued by external sources, most often banks. While the precise mechanics of the reconciliation process may vary from company to company, they all more or less follow the same template.<\/p>\n\n\n\n

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  1. Gather the necessary records<\/strong>: This entails bringing together the most recent bank statement along with your company\u2019s general ledger<\/a> or books. These are the records you will be reconciling.<\/li>\n\n\n\n
  2. Compare deposit records<\/strong>: Compare the bank deposits noted in the ledger with those in the bank statement. All entries in the debit side of the bank column in the ledger should agree with the credit side of the bank statement and vice versa.<\/li>\n\n\n\n
  3. Adjust the bank statement<\/strong>: If there are deposits in transit, outstanding checks, or bank errors they must be accounted for. Adjust the bank balance to reflect these anomalies to harmonize the ledger with the bank statement. Bank errors usually take the form of omitting a deposit or entering the wrong deposit amount. You may need to work with the bank to reconcile these kinds of bank errors.<\/li>\n\n\n\n
  4. Account for interest and fees<\/strong>: Monthly bank charges, NSF check charges, overdraft fees and more all need to be accounted for and deducted from the cash account. Conversely, any interest earned since the last reconciliation must be added to the cash account.<\/li>\n\n\n\n
  5. Compare the adjusted balances<\/strong>: After completing these steps, your general ledger and bank statement should be in agreement. If they are not you will need to repeat the reconciliation process. Books that resist reconciliation may also indicate fraud.<\/li>\n<\/ol>\n\n\n\n

    Looking for instructions for reconciling accounts receivable? Read our blog<\/a>.<\/p>\n\n\n

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    The Accountant\u2019s Guide<\/h2>\n

    4 Steps to a More Accurate and Efficient Account Reconciliation Process<\/p>\n <\/div>\n Download Guide<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n

    What are Common Reasons for Reconciliation Discrepancies?<\/h2>\n\n\n\n

    Discrepancies pop up all the time during the reconciliation process. The following are some of the most common reasons for reconciliation discrepancies<\/a>.<\/p>\n\n\n\n

    Timing differences<\/strong><\/p>\n\n\n\n

    Oftentimes a company will enter a deposit or payment into their ledger before said payment has cleared with the bank. This usually occurs with payments and deposits made near the end of the month.<\/p>\n\n\n\n

    For example, a check may have been received on June 30th and recorded in the cash account for June. However, it may not be processed by the bank for several days and will end up appearing on the July bank statement.<\/p>\n\n\n\n

    Human error<\/strong><\/p>\n\n\n\n

    People on both the company and the bank side may make errors when manually entering information. Perhaps someone moved a decimal point by mistake, typed the wrong number or transposed digits. For the record: if the discrepancy is a multiple of 9 chances are good it is a transposition error.<\/p>\n\n\n\n

    In any month there usually won\u2019t be more than 1 or 2 such mistakes, which is good because they can be difficult to track down.<\/p>\n\n\n\n

    Missing Transactions<\/strong><\/p>\n\n\n\n

    Check printing fees, credit card fees and interest, electronic deposits and more can get lost in the transactional miasma. In many cases, your first awareness of them will come when you see them noted on the bank statement. Fortunately, they are usually easy to spot and correcting them simply entails entering the information into the company books.<\/p>\n\n\n\n

    Fraud<\/strong><\/p>\n\n\n\n

    It is estimated that businesses lose up to 5% of their revenue each year to fraud. A staggering thought when you consider the trillions of dollars in play. Fraud may take many forms including, but not limited to:<\/p>\n\n\n\n