Learn how to compare bank statements to accounting records for your small business. Follow these steps to reconcile your bank account and your accounting records.

Being a SME business owner often means you don't want to make time in an already busy day to do the boring paperwork. Too often I find that my smaller clients can be months, or sometimes a year (!), behind in updating their financial records and just run the business based on the balance in the bank account. This is a BIG mistake!!! If accounting/numbers is not a strength (or interest), as soon as you can afford it, get a good bookkeeper to do it all for you. They have the time and skills to do it far quicker (and often better) than you. They will tell you if something is wrong. Horses for courses...

Bank reconciliations are critical as your accounting records may give you a false impression of financial health of your business. They should be done on a frequent basis.

How do you compare bank statements to accounting records?

If you run a small business, you need to keep track of your income and expenses, as well as your tax obligations. One way to do that is to compare your bank statements to your accounting records on a regular basis. This process, also known as bank reconciliation, can help you identify and correct any errors or discrepancies in your financial data. Here are some steps to follow when you compare bank statements to accounting records.

1 Review your bank statement

Your bank statement shows all the transactions that occurred in your business bank account during a specific period, usually a month. You should review your bank statement carefully and look for any unusual or unfamiliar items, such as fees, charges, interest, deposits, or withdrawals. You should also check the opening and closing balances and the dates of the statement.

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2 Review your accounting records

Your accounting records show all the transactions that you recorded in your bookkeeping system during the same period as your bank statement. You should review your accounting records and make sure they are complete and accurate. You should also check the opening and closing balances and the dates of the records.

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Milcent Sayia

Results-Driven Senior Accountant | ACCA Candidate | Expert in Financial Management, Financial Reporting, Cashflow Projections Revenue Auditing, and Process Optimization | 🚀CPA Finalist
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Bank reconciliation are very crucial for an organization, It helps check if cashbook transactions are captured correctly as well as the check bank entries

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Peter Adams

Supporting business owners with business solutions that will make your business thrive. and create a future built on your success. Business author with many practical books.
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This step is important as it ensures that you have taken up all entries. Hence, the purpose of bank reconciliations on a frequent basis. I have seen on too many occasions where clients have believed that there accounting records are correct but the bank statement balance differs.

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3 Compare the balances

The next step is to compare the balances of your bank statement and your accounting records. Ideally, they should match, but in reality, there may be some differences due to timing or errors. For example, some transactions may not have cleared or posted in your bank account yet, such as checks, deposits, or transfers. These are called outstanding items and they need to be adjusted in your accounting records. Similarly, some transactions may not have been recorded in your accounting records yet, such as bank fees, interest, or automatic payments. These are called reconciling items and they need to be added or subtracted from your accounting records.

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Peter Adams

Supporting business owners with business solutions that will make your business thrive. and create a future built on your success. Business author with many practical books.
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Bank reconciliations are critical as your accounting records may give you a false impression of financial health of your business. They should be done on a frequent basis.

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4 Make the adjustments

Once you have identified the outstanding and reconciling items, you need to make the necessary adjustments in your accounting records to match your bank statement. You can use a bank reconciliation template or software to help you with this process. You should also keep a record of the adjustments and the reasons for them.

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5 Verify the results

The final step is to verify that the adjusted balances of your bank statement and your accounting records are the same. This means that you have successfully reconciled your bank account and your accounting records. You should repeat this process for each bank account that you use for your business and for each period that you need to report or file taxes.

Comparing bank statements to accounting records is an essential part of small business accounting and tax. It can help you monitor your cash flow, prevent fraud, avoid penalties, and prepare accurate financial statements. By following these steps, you can make this process easier and more efficient for your business.

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6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Martin Williamson

We cannot solve our problems with the same thinking we used when we created them
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Being a SME business owner often means you don't want to make time in an already busy day to do the boring paperwork. Too often I find that my smaller clients can be months, or sometimes a year (!), behind in updating their financial records and just run the business based on the balance in the bank account. This is a BIG mistake!!! If accounting/numbers is not a strength (or interest), as soon as you can afford it, get a good bookkeeper to do it all for you. They have the time and skills to do it far quicker (and often better) than you. They will tell you if something is wrong. Horses for courses...

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How do you compare bank statements to accounting records?

1

2

3

4

5

6

1 Review your bank statement

2 Review your accounting records

3 Compare the balances

4 Make the adjustments

5 Verify the results

6 Here’s what else to consider

Small Business

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How do you compare bank statements to accounting records?

1

2

3

4

5

6

1 Review your bank statement

2 Review your accounting records

3 Compare the balances

4 Make the adjustments

5 Verify the results

6 Here’s what else to consider

Small Business

Rate this article

Thanks for your feedback

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