Banking reconciliation

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What is banking reconciliation

Bank reconciliation is the process of validating the alignment between the transactions on the bank statement and the entries on the bank account ledger. Although not legally mandated, this practice is of paramount significance for companies, as it guarantees the accuracy and integrity of financial data when compared with the bank statement. It is also an integral component of corporate treasury management procedures.

Why is it important?

The necessity for reconciliation arises due to the common occurrence of companies registering transactions at a different time than when the same transactions are recorded by the bank. Consequently, disparities between the two records may emerge.
Regular verification of correspondence is essential for identifying errors in accounting or bank records. It also facilitates the monitoring of any outstanding payments from customers, as well as delays in the debiting or crediting of specific transactions by the bank. The frequency of reconciliation should align with the regularity of business accounting document preparation, typically performed on a monthly (end of the month) basis or at least annually.
Bank reconciliation is a task within the purview of the corporate accounting function, typically undertaken by the in-house administrative officer or an external accounting professional responsible for general accounting. Such professional guidance enables accounting experts to leverage automated reconciliation methods, thus optimizing efficiency, minimizing manual errors, and streamlining the workflow.

How do it?

Bank reconciliation can be carried out in three ways:
Manual The manual comparison between the bank statement and the financial statement is conducted on paper. The operator prints the documentation and uses a pen to verify the entries that match in both the account statement and the accounting ledger. Any discrepancies require manual correction in the journal.
Excel In this mode, you are required to complete an Excel spreadsheet, on one side inputting the transactions from the bank statement, and on the other side, the entries from the accounting journal. Subsequently, you utilize the provided functions to compare the two records. Should any discrepancies arise between the data, they need to be manually documented in the accounting journal.
Specific software The Bank Reconciliation feature in Mexal and Passcom empowers you to retrospectively verify the alignment of the entries recorded in primanota with the information presented in the bank statement. To reduce accounting errors, this feature enables you to automatically generate initial bank movement records, thereby mitigating the need for subsequent periodic reconciliation checks.

enterprises – industry – services

accountants – tax advisors

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