Starting a new business? Get 40% off our accountancy services for 3 months! 😀

x

Keeping accurate financial records is hugely important when running a business. After all, those are the numbers that decisions are made on. And a huge part of getting those figures right? Bank reconciliation.

In this ongoing series of accounting FAQs, we will cover what bank reconciliation means, why it’s important, and how to do it.

What does bank reconciliation mean?

Bank reconciliation is the process of making sure that the information in your accounting records matches the transactions in your bank account.

The opening and closing balances must match, as well as all of the individual transactions in between.

In theory it’s a simple concept, but it’s easy to make mistakes if you’re not careful, which is why bank reconciliation is best done on a regular basis. It saves you from having to check a whole year’s worth of transactions in one go, or needing to unpick old mistakes!

Why is bank reconciliation important?

Having transactions in your bank account which are missing from your accounting system gives an inaccurate picture of how much money you have in the bank. This could find you paying an incorrect amount of tax. Ouch!
instant quotes for online accountancy

Additional or missing transactions make things difficult when the time comes to do your taxes. Under-reporting profits leads to a whole world of HMRC misery, even if you didn’t do it on purpose. You could end up on the wrong side of some hefty fines.

If, on the other hand, you add in extra, or even duplicate, transactions, you might end up paying more tax than you should because your profit figures are skewed by the mistakes.

How do you reconcile banking records?

The first step is to get a list of transactions from your bank account(s). Then pull up your bookkeeping records, showing all of your income and outgoings.

These might be recorded on a spreadsheet, in which case the next job is to go through each transaction in your bank account, and ensure there is a record of it in your bookkeeping. Check the amount, the dates, and whether it’s income or an expense.

Or, you might use bookkeeping software like our very own Pandle. In that case, banking transactions are imported into the software using bank feeds or file imports, which make discrepancies much less likely.

You can even set up Bank Rules to match transactions to invoices automatically! We’re accountants, so we find ways of saving time and reducing errors very exciting.

Find out more about our online accountancy services, including bookkeeping.

About The Author

Kara Copple

An experienced business and finance writer, sometimes moonlighting as a fiction writer and blogger.

More posts by this author
guest
0 Comments
Inline Feedbacks
View all comments

Read more posts...

Get Ready for Small Business Saturday UK 2022

Small Business Saturday started in the US in 2010, on the first Saturday following Thanksgiving. It aims to encourage shoppers to consider…

Read More

Architects and Tax

Architecture is a highly diverse sector when it comes to tax. It’s partly down to the type of businesses that carry out…

Read More

June 2022 Client of the Month: Manea Kella

This month we spoke to Adrian Manea, architect and director at Manea Kella, a London based RIBA Chartered architecture and interior design…

Read More
Back to Blog...

Confirm Transactions

The number of monthly transactions you have entered based on your turnover seem high. A transaction is one bookkeeping entry such as a sale, purchase, payment or receipt. Are you sure this is correct?

Yes, submit my quote
No, let me change it

Please contact our sales team if you’re unsure

VAT Returns

It is unlikely you will need this service, unless you are voluntarily registered for VAT.

Are you sure this is correct?

Yes, the business is VAT registered
No, let me change it

Call us on 020 3355 4047 if you’re not sure.

Bookkeeping

You only need this service if you want us to complete the bookkeeping on your behalf.

Would you prefer to complete your own bookkeeping?

Yes
No

Call us on 020 3355 4047 if you’re not sure.