Why reconciliation matters more than anything else in this manual
Reconciliation is where you compare what your books say about a bank account with what the bank says. When the two agree, you have strong evidence that nothing has been missed, duplicated or invented. When they disagree, you have found a problem while it is still small.
A business that reconciles every month always knows what it is worth. A business that does not is guessing, however neat its invoices look.
Bank accounts
Banking → Accounts lists each real bank or cash account, mapped to an account in your chart of accounts. Name them the same as the real accounts so nobody has to guess which is which.
Reconciling
Banking → Reconciliation. Pick the account and the statement period, and enter the closing balance from your bank statement.
Work down the statement and tick off each line against the transaction in your books. You will meet three situations:
It matches. Tick it and move on.
It is on the statement but not in your books. Something happened that you did not record — bank charges, interest, a direct debit, a customer who paid without telling you. Record it now, then tick it off.
It is in your books but not on the statement. Usually timing: a cheque you have written that has not been presented, or a payment made after the statement date. Leave it unticked; it will clear next month. If it is still outstanding months later, investigate — it may be a payment that never happened.
When every line is accounted for, the difference should be zero and you can complete the reconciliation.
When it will not balance
Work through these in order, because they cover most differences:
- A transposed figure. If the difference divides exactly by 9, you have almost certainly typed
two digits the wrong way round somewhere — 5,940 instead of 5,490.
- A doubled entry. If the difference is exactly twice a transaction on the statement, something
has been entered twice, or entered once on the wrong side.
- A missing bank charge or interest line.
- A payment matched to the wrong invoice, so the bank total is right but the detail is not.
- An amount entered with the right figure but the wrong date, falling outside the period.
Resist the temptation to post a balancing figure to make it agree. A reconciliation that balances because you forced it proves nothing, and the real error is still there.
Cheques
Banking → Cheques tracks cheques written but not yet cleared. Those are exactly the items that legitimately appear in your books but not yet on the statement, so keeping them here makes reconciliation faster and explains the difference without guesswork.
How often
Monthly, as soon as the statement is available, is the right rhythm for most businesses. If you handle a lot of cash or a high volume of transactions, weekly is better. The longer you leave it, the more transactions you have to search through to find a difference of a few hundred.