What a bank reconciliation is and why you need one

A bank reconciliation is a line-by-line comparison between what your bank says you have and what your own records say you have. The goal is to find out why those two numbers don't match—and they almost never do on the first try.

You need one because your bank's balance and your balance are almost always different on any given day. Checks you wrote haven't cleared yet. Deposits you made haven't posted. The bank charged a fee you haven't recorded. A payment you authorized is still in transit. A reconciliation forces you to account for every one of those gaps, so you know your actual available balance and catch errors before they become problems.

Most people reconcile monthly, usually within a few days of the statement arriving. Some do it weekly. The frequency depends on how many transactions you have and how much money moves through the account.

Key Takeaways

  • Gather your bank statement, your check register or transaction log, and any deposit slips or receipts for the period covered by the statement.
  • Mark off every transaction that appears on both your records and the bank statement, starting with the oldest transactions first.
  • List all outstanding checks (checks you wrote that haven't cleared yet) and deposits in transit (money you sent that hasn't posted yet) separately.
  • Use the reconciliation formula: bank balance plus deposits in transit minus outstanding checks equals your book balance, and those two final numbers must match.
  • If they don't match, retrace your steps by checking for transposition errors, duplicate entries, and fees or charges you may have missed recording.

Gather the documents you need

Start by collecting three things: your most recent bank statement, your own transaction record (a check register, a spreadsheet, or whatever system you use to track money going in and out), and any deposit slips or receipts for deposits made near the end of the statement period.

The bank statement shows the opening balance on the first day of the period, every transaction the bank processed, any fees or interest, and the closing balance on the last day. Your own records show what you believe you spent and received. These two views of the same account will differ because of timing—not because anyone is wrong.

If you use online banking, download or print the statement in full. If you use a checkbook, have the register in front of you. If you track transactions in a spreadsheet or accounting software, pull up the file for the same date range as the statement.

Mark transactions that match on both sides

Go through your records line by line and check off every transaction that also appears on the bank statement. Start with the oldest transactions and work forward. This is tedious, but it is the only way to catch errors.

For each check, verify the check number, the date, and the amount. For each deposit, verify the date and amount. For each electronic payment or transfer, verify the date, payee, and amount. If the date on your record is different from the date on the statement, that is normal—the bank's date is when it posted, not when you initiated it. Mark it as matched anyway.

As you mark transactions off, you will be left with two piles: transactions on your records that are not on the statement yet, and transactions on the statement that are not on your records.

List outstanding checks and deposits in transit

Outstanding checks are checks you wrote and recorded in your register, but the bank has not yet cashed. Deposits in transit are deposits you made and recorded, but the bank has not yet posted.

Pull these from the unmatched transactions on your side of the ledger. Write down the check number and amount for each outstanding check. Write down the date and amount for each deposit in transit. These are normal and expected—they will clear in the next few days or the next statement period.

Do not include a check or deposit in this list if it is more than two weeks old. If a check has been outstanding for longer than that, it may have been lost in the mail or the recipient may not have cashed it. If a deposit is more than two weeks old and still has not posted, contact your bank—something may have gone wrong.

Use the reconciliation formula

Now you have all the pieces. Use this formula to see if your records match the bank's:

Bank statement closing balance + Deposits in transit − Outstanding checks = Your book balance (what you think you have) This final number should equal the balance in your own records.

If the two numbers match, you are done. Your records and the bank's records are in sync.

If they do not match, the difference is called the reconciling item. Write down the exact amount of the difference. This number will guide you to the error.

Find errors if the numbers don't match

If your reconciliation does not balance, start by checking the math. Recalculate the bank balance plus deposits in transit minus outstanding checks. Use a calculator and do it twice.

Next, look for transposition errors—numbers reversed. If you wrote $156 but recorded $165, the difference is $9. If the reconciling item is $9, $90, $900, or $9,000, you may have flipped digits somewhere. Check every amount you recorded against the bank statement or your receipt.

Check for duplicate entries. Did you record the same transaction twice? Did the bank post the same transaction twice (rare, but it happens)? Search your records for matching amounts on nearby dates.

Look at the bank statement for charges or fees you did not record. Monthly maintenance fees, overdraft fees, wire transfer fees, and check printing charges all come from the bank and must be subtracted from your balance. If you see a charge on the statement that is not in your records, that is likely the culprit.

If the difference is still there, go back and verify every single transaction from the statement against your records, one more time. A single missed or misrecorded amount will throw off the entire reconciliation.

Record any adjustments to your balance

Once you find the error, record it in your own transaction log. If the bank charged a fee you missed, subtract it from your balance. If you recorded a deposit amount wrong, correct it. If you forgot to record a payment, add it now.

After you make the adjustment, recalculate your book balance. Now run the reconciliation formula again. The two numbers should match.

Keep the bank statement and your reconciliation notes together. If a question comes up later about a transaction, you will have a record of when you verified it.

Frequently Asked Questions

What if a check I wrote six months ago still hasn't cleared?

A check that old is likely lost or the recipient never cashed it. Contact the person or business you wrote it to and ask if they received it. If they did not, you can stop payment on the check through your bank (there is usually a fee) and write a new one. If they did receive it but never cashed it, ask them to do so or offer to pay another way.

Can I reconcile if I don't have the paper bank statement?

Yes. Log into your online banking and view the statement for that month. Most banks let you download it as a PDF or view a complete transaction history. Print it or keep it open on screen while you reconcile. The process is the same whether you use paper or digital.

What does it mean if the bank balance is higher than my balance?

It usually means you have outstanding checks or payments that have not cleared yet. Subtract those from the bank balance and the numbers should match. If they still don't, you may have recorded a deposit that the bank has not yet posted, or you may have missed recording a fee or charge.

How often should I reconcile?

Monthly is standard and matches the bank's statement cycle. If you have a lot of transactions or you are managing money for a business, weekly or even daily reconciliation can catch errors faster. The more often you reconcile, the easier it is to find mistakes because there are fewer transactions to review.

What if I find an error the bank made?

Contact your bank immediately with the transaction details—the date, amount, and description. The bank will investigate and correct it if the error is confirmed. Keep a record of when you reported it and who you spoke to. Most banks will reverse incorrect charges within one to two business days once they confirm the mistake.