Bank reconciliation: the monthly hour that keeps your books honest

Bank reconciliation is the check that your ledger and your bank account agree. You take the closing balance on the statement, adjust for the things that have not cleared yet, and confirm the result matches the balance in your books. If it does, the period's records are trustworthy. If it does not, something is wrong and you now know it — which is the entire point.

Nearly every accounting error surfaces here first: the duplicate payment, the invoice entered twice, the transfer recorded in one direction only, the bank charge nobody knew about, the customer payment allocated to the wrong invoice. Reconciliation is not paperwork about the past. It is the earliest possible warning.

What reconciliation actually compares

• The closing balance on the bank statement for the period.
• The balance of the bank account in your ledger on the same date.
• Deposits recorded in your books that have not yet appeared on the statement.
• Payments issued but not yet presented — the classic uncleared cheque, and card payments that settle days later.
• Items on the statement that are not in your books at all: bank charges, interest, direct debits, card fees, failed payments.
• Errors on either side, including the bank's — rare, but they happen and they are found exactly this way.
• The reconciled difference, which must be zero. "Close enough" is how a small error becomes a permanent one.

Reconcile every account with a statement, not just the current account: savings, each card, merchant accounts like a payment processor, and petty cash. Card and processor accounts are where discrepancies hide, because fees are deducted before the money arrives and the gross-versus-net difference is easy to record wrongly.

The monthly routine

1. Do it monthly, on a fixed day, for every account. Frequency is what keeps it small — a year's backlog is a different task with a different cost.
2. Import or enter the statement for the period. A CSV or OFX download from the bank beats typing, and removes transcription errors entirely.
3. Match automatically what you can, then work the unmatched list rather than scrolling the whole statement.
4. For each statement line with no counterpart, decide: is it missing from the books, or is it a duplicate in them? Enter or correct it now, not in a note.
5. For each ledger entry with no statement line, check whether it is genuinely uncleared or simply never happened.
6. Investigate anything still unexplained before closing. An unexplained difference carried forward will still be there — and less explicable — next month.
7. Record the reconciliation: date, closing balances, who did it. It is evidence for your accountant and for you.
8. Lock the period once reconciled, so nobody edits transactions behind a closed reconciliation.

When it will not balance

Work in order rather than staring at the total. Check the opening balance first — if it differs from last month's closing, the problem is behind you, not in this period. Then look for a difference equal to a single transaction, which means one item is missing or doubled. A difference divisible by nine often means transposed digits. A difference exactly twice a transaction means something was recorded in the wrong direction. Only when those fail is it worth going line by line.

Ettex Books handles the mechanics: bank statement import from CSV or OFX, bank reconciliation to match statement lines against entries, categories and auto-categorisation rules so recurring bank charges and direct debits file themselves, double-entry journals with full debit and credit control for the corrections you make along the way, attachments on any entry so the receipt for an unexplained card payment ends up with it, multi-currency with rate tracking for accounts held in another currency, and instant search across all periods when you are hunting the transaction that broke it. Where a payment relates to a customer invoice, Ettex Invoices carries the status that tells you what has been settled.

Plainly: Ettex Books has no live bank feed. There is no Open Banking or direct connection that pulls transactions in automatically — you download a CSV or OFX file from your bank and import it. For a monthly reconciliation that is a two-minute difference; if you want transactions appearing continuously without you fetching them, that is a feature to look for elsewhere.

Why reconciliations go wrong

• Done annually, at which point every unexplained item is a year old and nobody remembers.
• Only the main current account reconciled, leaving cards and payment processors unchecked.
• Processor fees recorded net, so revenue is understated and the account never quite matches.
• Differences "adjusted" with a balancing entry instead of being explained, which hides the underlying error permanently.
• Transactions edited after a period was reconciled, silently breaking a reconciliation that was correct.
• Transfers between own accounts recorded once instead of twice, which is the most common single cause of a stubborn difference.
• No record of who reconciled what and when, so nobody can tell which periods have actually been checked.

Bank reconciliation is the cheapest audit you will ever run on yourself. Monthly, every account, every difference explained rather than adjusted away — and lock the period once it agrees.