How to Reconcile a Bank Statement

Reconciling a bank statement helps you confirm that your personal financial records match your bank’s records. The process can help you spot unauthorized transactions or identify recurring subscriptions that you may have forgotten about.

Bank statement reconciliation is an important process for individual consumers and business owners alike. You don’t need advanced accounting skills or a company to outsource the task to, either.

What is bank statement reconciliation?

Bank statement reconciliation means comparing the transactions in your financial records with the transactions listed on your bank statement. You check deposits, withdrawals, payments, transfers, fees, and other activity to make sure both records show the same information.

A bank statement may show transactions that you have not recorded yet. For example, your bank may list a monthly maintenance fee or an automatic payment that you forget to include in your budget. The goal of reconciliation is to explain every difference between your records and the bank’s records.

Why you should reconcile your bank statement

Regular reconciliation gives you a clearer picture of how much money you actually have available. It also gives you a chance to catch mistakes before they affect your budget or cause a payment to bounce.

Bank statement reconciliation can help you:

• Find unauthorized or unfamiliar transactions
• Catch duplicate charges
• Identify automatic payments you forgot about
• Account for bank fees and interest
• Keep your budget more accurate

Reconciliation is also a good financial habit. You can compare your bank statements to your personal records and monthly budget to identify opportunities to save more.

Read more >> How to monitor your accounts for unauthorized activity

How to reconcile a bank statement step by step

Six basic steps can help you balance your finances, comparing each transaction to your records and accounting for anything that doesn’t match.

Step 1: Gather your records

View your most recent bank statement online or print it out to review a paper copy. You can usually access it through your bank’s website or mobile app.

Next, gather the records you use to track your money, which may include a notebook, spreadsheet, or app. If you aren’t tracking your income and spending, it will be much harder to reconcile them.

Step 2: Compare your records to the bank statement

Start with the beginning balance on your bank statement. Compare it with the balance from your records at the start of the same period. Compare each transaction, looking at deposits, withdrawals, purchases, and any other activity.

Pay close attention to the transaction dates and amounts. A small typo in your records can create a discrepancy, or at least the appearance of one.

Step 3: Account for outstanding transactions

Some transactions may appear in your record but not on your bank statement yet — for example, a check you wrote that hasn’t been cashed or a payment still in processing.

List them out, then adjust the bank’s ending balance for them, adding any deposits that haven’t yet posted or payments that haven’t yet cleared. The adjusted figure should match your records.

Step 4: Adjust for bank fees or interest

Your bank statement may include fees or interest that you did not record. Examples include monthly account fees, overdraft fees, and ATM fees. Record any missing fees or interest in your records, subtracting fees and adding interest you’ve earned.

Use the exact amounts on your statement. Don’t round up or down.

Step 5: Identify and resolve discrepancies

After you compare every transaction, look for differences that you can’t explain. Check the transaction amount, date, and description in both records. If you find a transaction you don’t recognize, report it to your bank as soon as possible.

Under federal law, reporting an unauthorized electronic transfer within two days of discovering it limits your liability to $50. Wait longer than 60 days after your statement is sent, and your bank may not be required to cover the loss.

Step 6: Update your records

Once you explain any discrepancies, update your personal financial records so that they are accurate. You should also adjust your budget to account for all recurring monthly expenses. Your updated records should now give you a more accurate picture of your account balance.

What to do if your bank statement doesn’t balance

If your records don’t match your bank statement, go through the transactions line by line.

Don’t assume that the discrepancies don’t matter. Even if all of the transactions on your bank statement are legitimate, you want to be able to account for where your money is going and what you are spending it on. Unchecked spending can make it difficult to create and stick to a budget.

Start with the beginning balance and work forward one transaction at a time. Chances are that you simply skipped over something. If you find something you can’t explain, contact your bank as soon as possible.

How often should you reconcile your bank statement?

You should reconcile your bank statement at the end of each month. A monthly schedule works well because most banks provide monthly statements. Regularly comparing your budget and spending records to your bank statement can help you identify problems sooner.

If you are on a tight budget, you may want to reconcile your account more often, such as weekly or bi-weekly, in accordance with your pay schedule. Consistency is essential. If you fall behind on bank reconciliation, there is a much greater likelihood of deviating from your budget.

When trying to reduce your spending, pay close attention to recurring subscriptions that you don’t want or need. Cutting out a few subscriptions can help you save more each month as you work toward your financial goals.

Read more >> How to monitor your credit score

Tips to make bank reconciliation easier

Bank statement reconciliation can be a tedious process, especially if you average many transactions a month.

These six tips can streamline the reconciliation process:

• Track transactions as soon as you make them
• Keep receipts to verify purchases
• Use a budgeting app or budgeting spreadsheet
• Review your bank account regularly
• Mark transactions as they clear your account
• Keep your bank statements in an organized location

You can also reduce the likelihood of errors by recording transactions consistently.

Read more >> How to find all your debts in one place

Apply the same habit to your credit

Reconciling works because you’re checking your bank’s record against your own. Your credit report deserves the same treatment. Errors and accounts you didn’t open can show up there, with nobody to catch them but you.

Once your credit reports are clean, it’s time to give them something positive to show. Kikoff’s Credit Account reports your on-time payments to all three credit bureaus, building the payment history that carries most weight in your score. No hard credit check required.