What bank reconciliation is and why you do it
Bank reconciliation is the process of comparing your personal records of deposits and withdrawals against what your bank says you have. You do it to catch errors, spot fraud, and find out why your balance doesn't match the bank's balance. Most people reconcile monthly, using the statement the bank sends or makes available online.
The gap between what you think you have and what the bank says you have usually comes from timing: checks you wrote that haven't cleared yet, deposits you made that are still processing, or fees the bank charged that you haven't recorded. Sometimes it's a real mistake—yours or the bank's. Reconciliation finds out which.
You need only four things to start: your bank statement (paper or digital), your checkbook register or transaction list, a pen, and about 15 minutes. If you use accounting software or a spreadsheet, the software can do much of the math for you, but the logic is the same.
Key Takeaways
- Start with your bank's ending balance and your personal ending balance, then list the differences between them to find out what hasn't cleared yet.
- Subtract any outstanding checks (checks you wrote that the bank hasn't paid yet) from your personal balance.
- Add any deposits in transit (money you deposited that the bank hasn't received or credited yet) to your personal balance.
- Subtract any bank fees or charges you didn't record, and add any interest the bank credited, to bring your personal balance in line with the bank's.
- When both balances match, reconciliation is complete; if they don't, go back and check for math errors, duplicate entries, or transactions you missed.
Gather your bank statement and your records
Pull your most recent bank statement. If you bank online, log in and download or view the statement for the month you want to reconcile. If you receive paper statements, find the most recent one. The statement shows the bank's opening balance, all deposits and withdrawals the bank processed during the month, and the bank's ending balance.
Next, gather your own records: your checkbook register, your debit card receipts, your deposit slips, or a list of transactions from your accounting software or spreadsheet. You need to know every transaction you made during the same period the bank statement covers. Write down your personal ending balance—the amount you believe you have right now.
Set up a simple worksheet or use your bank's reconciliation form if they provide one. At the top, write the bank's ending balance and your personal ending balance. You'll use this to find the difference.
List checks and transfers that haven't cleared
Go through your checkbook register or transaction list and find every check you wrote and every electronic transfer you sent out during the month. For each one, check whether it appears on the bank statement. If it does, mark it as cleared. If it doesn't, write it down on a separate list—these are outstanding checks or outstanding transfers.
Add up all the outstanding checks and transfers. This is the total amount that has left your account (from your perspective) but hasn't left the bank's account yet. Write this total down; you'll subtract it from your personal balance in the next step.
Outstanding checks usually clear within a week or two, but older checks sometimes take longer. If you see a check from more than a month ago that still hasn't cleared, contact the payee to ask if they received it, or contact your bank to ask if they can trace it.
List deposits that haven't been credited
Now go through your records and find every deposit you made during the month. Check whether each one appears on the bank statement. If it does, mark it as cleared. If it doesn't, write it down—these are deposits in transit.
Add up all the deposits in transit. This is money you've recorded as received (from your perspective) but the bank hasn't credited yet. Write this total down; you'll add it to your personal balance in the next step.
Deposits usually clear within one or two business days, depending on how you made them. Mobile deposits and ATM deposits sometimes take longer than deposits made at a teller window. If a deposit is more than a few days old and still hasn't appeared, contact your bank.
Account for bank fees and interest
Look at the bank statement and find any fees the bank charged—monthly maintenance fees, overdraft fees, ATM fees, wire transfer fees, or any other charge. Check your personal records to see if you already wrote these down. If you didn't, subtract them from your personal balance now.
Also look for any interest the bank credited to your account. If your account earns interest, the bank will show the amount on the statement. If you didn't already record it, add it to your personal balance now.
Many people miss bank fees because they don't see them until the statement arrives. That's why reconciliation catches them: the bank's balance will be lower than yours until you account for the fees you didn't know about.
Do the math and match the balances
Now use the numbers you've gathered. Start with your personal ending balance. Subtract the total of outstanding checks and transfers. Add the total of deposits in transit. Subtract any bank fees you didn't record. Add any interest you didn't record. The result should equal the bank's ending balance.
If the two balances match, reconciliation is complete. Write the date on your worksheet and file it with your statement.
If they don't match, the difference is usually small—a few dollars or less. Go back and check for math errors: did you add or subtract correctly? Did you list a transaction twice? Did you miss a transaction entirely? Look at both your records and the bank statement side by side and mark off each transaction as you find it on both lists. The unmarked transaction is usually the one you missed.
What to do if the balances still don't match
If you've checked your math and still can't find the error, look for these common problems: a deposit or check that appears on the statement but not in your records, a transaction you recorded but the bank didn't process, a math error in your checkbook register, or a bank error.
If the difference is small and you can't find the source, you have two choices: adjust your personal balance to match the bank's (assuming the bank is correct), or keep investigating. Most people adjust and move on, especially if the difference is a few dollars. If the difference is large or you suspect fraud, contact your bank and ask them to review the statement with you.
Keep your reconciliation worksheet and statement together. If a dispute comes up later, you'll have a record of what you checked and when.
Frequently Asked Questions
How often should I reconcile my bank account?
Most people reconcile monthly, when the bank statement arrives. If you use online banking and check your balance frequently, you might reconcile more often—weekly or even daily. The more often you reconcile, the easier it is to spot errors and fraud early.
What if I find a transaction on the bank statement that I didn't make?
Contact your bank immediately. This could be fraud, a duplicate charge, or an error. The bank can investigate and reverse unauthorized transactions, but you usually have to report them within a certain time frame—often 30 to 60 days from the statement date. Don't wait.
Can I reconcile using my online banking app instead of a paper statement?
Yes. Most online banking apps let you download transactions and compare them to your records. Some apps have a built-in reconciliation tool that does the math for you. The process is the same: compare what you recorded to what the bank recorded, account for timing differences, and make sure the balances match.
What does it mean if my balance is higher than the bank's balance?
Usually it means you've recorded deposits that haven't cleared yet, or you haven't recorded bank fees. Add up your deposits in transit and subtract any fees you missed. If that doesn't explain the difference, you may have recorded a transaction that the bank hasn't processed, or the bank may have made an error.
Do I need to reconcile if I never write checks?
Yes. Even if you only use your debit card and mobile deposits, reconciliation catches bank errors, fraud, and fees you didn't know about. The process is the same—compare your records to the bank's statement and account for timing differences.