Skip to content
Blog Articles

How To Complete a Bank Reconciliation

Publish date 14 Jul 2021

Table of Content

    Our Fractional CFO Services
    Learn More
    Bank Reconciliation

    How Do You Reconcile a Bank Statement?

    In order to complete a bank reconciliation, the account balance as reported by the bank is compared to the general ledger of a business.

    If the balances do not match, the business must identify the reasons behind this and reconcile the differences.  This is to ensure that every item is accounted for and the balances match. A reconciliation statement will be prepared.  It is important to note that the dates need to match and to use the ending bank balance. Attention to detail is key.

    What is Cash VS. Accrual Accounting?

    You only need to reconcile bank statements if you use the accrual method of accounting. If, on the other hand, you use cash basis accounting, then you record every transaction at the same time the bank does; there should be no discrepancy between your books and your bank statement.

    • Cash-basis accounting recognizes revenues when cash is received and expenses when they are paid. This method does not recognize accounts receivable or accounts payable. Many small businesses opt to use cash-basis because it is simpler to maintain. It is easy to determine when a transaction has occurred, since it is a matter of looking whether the money is in or out of the bank.

    Accrual accounting:

    • Accrual accounting is a method in which revenues and expenses are recorded when they are earned, regardless of when the money is received or paid. For example, an accountant would record revenue when a project is complete, rather than when the business gets paid a month later. The upside of accrual-basis is that it paints a more realistic picture of income and expenses during a given period, therefore providing a long-term picture of the business that cash accounting can’t provide.

    How Does It Work?

    1. Compare the Deposits

    The deposits must match the business records in the bank statement. The amounts in each deposit recorded should be compared in the debit side of the bank column of the cashbook, with the credit side of the bank statement and credit side of the bank column.

    2. Adjust the Bank Statements

    The bank statements may need to be adjusted to the corrected balance. You must add deposits in transit, deduct outstanding checks and add or deduct any bank errors. These instances can happen when checks or other things are written in the last few days of the month.

    A deposit in transit is money that has been received by a company and recorded in the company’s accounting system.  The cash accounts general ledger should be compared to the bank statement to spot any errors.

    3. Adjust the Cash Account

    By adding interest or deducting monthly charges and overdraft fees, you can adjust the cash balances in the business account. Businesses need to take bank charges, NSF checks and errors into account.

    Bank charges are services charges and feeds deducted for the banks processing of the business checking account. It can be charges from overdrawing your account, and if they have earned any interest on your bank account balance, they must be added to the cash account.

    An NSF (not sufficient funds) is a check that has not been honored by the bank due to insufficient funds in the organizations bank accounts. Errors in a cash account result in an incorrect amount being entered o or an amount being omitted from the records which could increase or decrease the cash account in the books.

    4. Compare the Balances

    After adjusting the balances as per the bank and books, the adjusted amounts should be the same. If they are not, then you will have to repeat the reconciliation process again. Once they are equal, business will prepare journal entries for the adjustments to the balance per books.

    Below is an example of a bank reconciliation:

    bank reconciliation statement

    How Do We Do it?

    Reconcile All Bank Accounts

    Within the transactions, the Consultant will take any transactions that do not fall within a general category to the business owner and determine what type of expense/income it is. This helps to understand anomalies or outliers.

    Figure Out The Exceptions

    Once accounts are reconciled, the Consultant can then go in and create cash-basis reports retroactively for the months needed. This can include an income statement, balance sheet, P&L, etc.

    Create Cash-Basis Reports

    Once the business is caught up on their cash-basis reporting, they can consider implementing Generally Accepted Accounting Principles (GAAP), which means moving towards accounting on an accrual basis.

    Consider GAAP

    Once the business is caught up on their cash-basis reporting, they can consider implementing Generally Accepted Accounting Principles (GAAP), which means moving towards accounting on an accrual basis.

    NOW CFO strategy and analysis level resources have extensive experience with bank reconciliations. Our high-level accountants can assist in the execution of your reconciliation or catch-up. Under any structure, our consultants bring our mission of your continued success and growth to your project and will be sure that your financials are clean, accurate and timely.

    Get Your Free Consultation

    Gain Financial Visibility Into Your Business

    We provide outsourced CFO, fractional CFO, and temporary CFO, Controller, Inventory Management and operational Accounting services that suit the needs of your business.

    • Hourly Rates
    • No Hidden Fees
    • No Long Term Requirements

    NOW CFO provides the highest level of expertise in finance and operational accounting to accelerate results and achieve strategic objectives for sustainable growth and success.

    After completing the form, a NOW CFO Account Executive will reach out and learn more about your needs so that we can pair you with the right Partner.

    Learn More: Guide to Bank Reconciliations and Catch-Ups


    Share this post

    Recent Articles

    View All Articles
    How Outsourced Accounting Services Support Business Growth
    Articles 10 min read

    How Outsourced Accounting Services Support Business Growth

    Read More
    When Does a Business Need Outsourced Accounting Service Cover
    Articles 11 min read

    When Does A Business Need Outsourced Accounting Services?

    Read More
    7 Insights Into How Outsourced CFOs Support Financial Reporting Stats
    Articles 5 min read

    7 Insights Into How Outsourced CFOs Support Financial Reporting

    Read More

    Don’t Just Take Our Word for It…
    Client Success, In Their Own Words

    The speed and efficiency in which NOW CFO stepped in and got us back on track was amazing and took a load of work off me. Their professionalism and responsiveness are first class, and I cannot recommend them highly enough. They are top notch across the board.

    alan-hill
    Alan Hill

    Director at Habitat for Humanity

    We have been overjoyed with the talent NOW CFO brought us. We did not have the staff bandwidth and they have been the perfect fit for our growing company. We were able to find the skillsets we were looking for, and NOW CFO was able to find our unicorn.

    Heath-McMillan
    Heath McMillan

    COO at CKR Financial Services

    NOW CFO was professional, knowledgeable, and courteous. They identified payroll fraud within our company, set up controls to make sure that time stealing did not continue and was instrumental in training our new admin.

    evelyn
    Evelyn Gorman

    President & CEO at GNS Electric Inc.

    NOW CFO has become an integral part of our management team. Since everything is cleaned up, we can move forward and look to the future instead of being stuck in the present. Would recommend them for any type of business.

    doug-martin
    Doug Martin

    CEO at Houston Country Community Hospital

    Because of the current economic climate, it is hard for us to retain staff who are capable of the accounting and CFO work that is needed. We would highly recommend using NOW CFO because of their superior service, value, and business acumen.

    kelcey-alison
    Kelcey Alison

    CEO at Gaming Specialized Logistics

    From the beginning of our relationship, NOW CFO has made us feel like we are in good hands. Our former bookkeepers had created a mess and NOW CFO stepped right in and learned our software and cleaned up the mess rapidly.

    Kevin-Gilbert
    Kevin Gilbert

    Office Administrator at Johnson May Law

    Over my 25-year entrepreneurial journey I have worked with many consultants, but they always felt like outsiders. NOW CFO is different and felt like part of our team. They rolled up their sleeves and pitched in wherever it was needed. PRICELESS!

    Lief-Larson
    Lief Larson

    Co-Founder & COO at JennyLife

    I am so glad we chose NOW CFO to help us with our accounting needs. Our controller level support has been phenomenal with the expertise, insights and commitment to our company. If we need anything, they are there and ready to jump in and help.

    Tiffany-Moore
    Tiffany Lacolucci

    Business Performance VP at Moore Fire Protection

    READY FOR YOUR FREE CONSULTATION?

    We provide outsourced, fractional, and temporary CFO, Controller, and operational accounting services that suit the needs of your business.

    For Faster Service 801-938-4764
    • Hourly Rates
    • No Hidden Fees
    • No Long-Term Requirements