A bank reconciliation explains differences between the bank statement and the cash account in the general ledger at a particular date. General ledger maintenance then checks that balances are supported, correctly classified and linked to their subsidiary records. Neither process should conceal unexplained differences with a balancing entry just to make the totals agree.
Understand what a reconciliation is proving
The bank statement is the bank's record of activity. The cash account in your accounting system is the business's record of the same account. Differences may arise from timing, missing entries, duplicates or mistakes. A reconciliation connects the two records and explains every remaining reconciling item at a defined date. Agreement is meaningful only when the explanation can be supported, not merely when a software screen displays a green tick.
Begin with the correct account and period. A business may have transaction accounts, savings accounts, credit cards, foreign-currency accounts and merchant facilities. Do not combine unrelated accounts to hide differences. Confirm the opening reconciled balance, the complete statement period and the closing bank balance. An unexplained opening difference will continue to distort later work even if all current transactions appear to match.
Treat the reconciliation as a control over completeness and accuracy, with practical limits. It can identify a missing bank charge or duplicated receipt, but it does not prove that every supplier invoice is genuine or that every payment had proper approval. Payment authorisation, document checking and supplier-master controls remain important. A well-reconciled account can still contain transactions that were correctly recorded but should not have been approved.
Gather a complete and independent starting set
Obtain the statement directly from the bank or an authorised export and keep the source version. A spreadsheet prepared manually from selected transactions is not the same as a complete statement. Check that the date range has no gaps or overlap with the previous import. Confirm whether the system uses transaction dates, value dates or settlement dates so that apparent differences near period-end can be explained.
For payment gateways, obtain the provider's transaction, fee, refund and payout reports. The amount deposited into the bank may be a net settlement of many sales, less fees and refunds. Matching that net receipt straight to sales can hide the detail. A clearing account or equivalent reconciliation can connect gross customer activity to the net bank settlement, using the treatment agreed for the business.
Retain customer and supplier references, deposit evidence and payment authorisations for items that need investigation. Access should be limited to the people performing or reviewing the work. Where a bookkeeper relies on downloaded files supplied by the owner, clearly identify that dependency. A reviewer should know which source was used and whether the information is complete, rather than assume that a file was independently obtained.
Work through differences in a consistent sequence
Match entries using the amount, date and underlying reference, rather than the amount alone. Two customers may pay identical amounts on the same day. A match that selects the wrong customer can leave the bank reconciled while the receivables ledger remains incorrect. Check that receipts settle the intended invoices and that supplier payments are allocated to the correct account.
Next identify transactions appearing in the bank but missing from the books. These may include charges, interest, debit orders or receipts not yet allocated. Obtain sufficient detail before posting. Then investigate entries in the books without a corresponding statement item: an unpresented payment may be a timing difference, but it may also be duplicated, cancelled or recorded in the wrong bank account.
Maintain a list of reconciling items with dates, explanations and expected resolution. A timing difference that never clears should not be carried forward indefinitely. Review older items first, especially round-sum adjustments and amounts with vague descriptions. If an entry is corrected, preserve the reason and approval. A reconciliation is strongest when another competent person can follow the trail from the original difference to the final treatment.
Extend the review to the general ledger
The general ledger brings together all accounts used to prepare the trial balance and financial reports. Its maintenance includes reviewing classifications, supporting balances and checking how subsidiary records connect to control accounts. Reconcile customer totals to the debtors control and supplier totals to the creditors control. Where payroll, inventory, fixed assets or financing are material, connect those schedules to their corresponding ledger balances.
Look for entries that bypass the normal process. A direct journal to a customer-control account may not update an individual customer's balance, depending on the system. A manual entry to a tax-control account may not appear in the relevant reporting module. Understand the software's behaviour before using journals as a shortcut. Agree which accounts require restricted posting access and independent review.
Review suspense and clearing accounts for purpose and age. A temporary balance can be sensible while information is obtained; it becomes a problem when it substitutes for investigation. Give each material item an owner and resolution plan. The monthly close should show whether these balances affect the reported result or represent unallocated amounts awaiting support. A tidy account name is not evidence that the underlying balance has been explained.
A practical example: one settlement, several components
Imagine a hypothetical online retailer whose provider deposits R9,500 into its bank account. The provider report shows R10,000 of customer collections, a R300 refund and R200 of fees. If the bank receipt is recorded as R9,500 of sales, the books lose the relationship between the customer activity and the costs of collection. The appropriate entries must reflect the actual transactions and the entity's accounting and tax position.
The reconciliation can instead start from the provider's gross activity and trace each component to the net payout. A clearing-account schedule would show the R10,000 collected, the R300 refunded and the R200 deducted, leaving the R9,500 settlement. The illustration ignores tax complications and is not a posting instruction for every provider arrangement. Its purpose is to show why the payout alone is an incomplete description of the business activity.
Now suppose a second payout includes transactions from the last day of the month but arrives after month-end. The remaining clearing balance may be a genuine settlement timing item. Retain the provider report and subsequent bank evidence showing when it cleared. If the amount remains outstanding beyond the normal settlement cycle, investigate rather than assume that all differences are timing-related. The same approach applies to card terminals and other collection channels.
Design the review and approval controls
Separate preparation from review where the size of the business allows it. The preparer gathers evidence and proposes corrections; the reviewer checks significant differences and unresolved items. In a very small business, an owner review can still add value if it includes access to source statements and a clear explanation of unusual movements. Merely signing the front page without examining the exceptions provides little control.
Protect the integrity of the records. The Companies Act's accounting-record requirements provide the legal context for company records, while a practical reconciliation process supports their reliability. Document who may post, approve and reverse entries. Keep closed periods controlled, and define how a material correction to an earlier period is authorised and communicated. These are practical control choices, not a promise that one checklist meets every legal requirement.
Avoid sharing banking passwords as a bookkeeping convenience. Use appropriate authorised access or secure statements and exports. Reconciliation access does not automatically authorise payment initiation, supplier-detail changes or account administration. If a discrepancy suggests an unauthorised payment or manipulated document, escalate it through the business's agreed incident process and preserve the evidence. Do not overwrite the transaction simply to remove it from the list of outstanding items.
Read the exceptions before relying on the reports
A reconciliation summary should distinguish corrected items, genuine timing differences and unresolved exceptions. The last group deserves management attention because it may affect the financial picture. If a material receipt cannot be allocated, the bank balance may be right while customer balances or revenue classification remain uncertain. State that limitation when circulating the reports instead of presenting all figures as final.
Use a small number of useful indicators. The number and value of old reconciling items, aged suspense balances and repeat import errors can reveal whether the process is improving. These measures support follow-up; they are not universal performance targets. A new business with a complex provider setup may initially have more queries than a stable service company with one bank account.
Connect the findings to their source. Repeated duplicate supplier payments may point to a weak approval process. Unallocated customer receipts may show that invoice references are unclear. Missing cash deposits may require changes in till reconciliation or cash handling. Correcting the ledger fixes the current entry; improving the upstream process reduces the chance that the same difference returns next month. That is the practical value of treating reconciliation as a recurring control.
Start with a manageable close checklist
List every bank and clearing account, the person responsible and the expected completion date. Confirm the opening balance and source statement, complete matching, identify missing entries and document outstanding items. Then connect material control accounts to their supporting schedules. Keep this checklist short enough that it is actually used, but specific enough to show what a completed reconciliation means for each account.
For a backlog, start at the last reliably reconciled date. Obtain continuous statements and avoid beginning with the most recent month while older unexplained differences remain unresolved. Agree the order of work, the information needed from the owner and how corrections will be reviewed. A catch-up exercise should end with a repeatable process, not only a one-off balanced spreadsheet.
Axia Finance can help maintain the ledger and connect reconciliations to monthly bookkeeping and reporting. Bring the latest trial balance, reconciliations, statements and a list of accounts or providers in use. Explain any changes in systems or responsibility. The first discussion should establish which balances can be supported, which exceptions matter and which controls will make the next close easier to complete.
Common questions.
Does a reconciled bank account mean the accounts are correct?
No. It means the differences between the statement and the recorded bank account have been explained, if the work was performed properly. Other accounts may still contain missing invoices, incorrect classifications or unsupported estimates. A reconciliation also does not prove that each payment was authorised. It is one important control within a wider accounting process.
Should I delete an old outstanding transaction?
Not without establishing what it represents and approving the correction. The item could be duplicated, cancelled, posted to the wrong account or still valid. Investigate the supporting evidence and preserve the reason for any reversal or adjustment. The objective is an accurate record and a clear history, not an empty outstanding-items screen.
How often should bank reconciliations be completed?
The frequency should match transaction volume, risk and reporting needs. Monthly reconciliation is a common part of a monthly close, while a busy business may need more frequent checks of cash or merchant settlements. Agree the schedule and responsibilities. A periodic review should also confirm that old timing differences actually clear rather than accumulate.
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Sources and further reading.
Official references consulted for this guide. Rules and administrative processes can change; check the applicable period and your circumstances.
General educational information, current to 5 November 2026. This guide does not determine the legal, tax or accounting treatment of a particular person or transaction. Obtain advice appropriate to your facts before acting. Read our editorial approach.
