What Is a Bank Reconciliation?
A bank reconciliation is the process of matching the cash balance in a company's accounting records to the balance on its bank statement, and explaining any differences. It confirms that recorded cash is accurate and surfaces missing, duplicate, or erroneous transactions.
What a bank reconciliation is and why it matters
A bank reconciliation is a fundamental control performed every period for every bank and credit-card account. The book balance and the bank balance rarely match on any given day because of timing — deposits in transit, uncleared checks, bank fees, or interest not yet recorded. Reconciling forces every difference to be identified and explained, which catches errors, detects fraud, and ensures the cash figure on the balance sheet is real. For accounting firms, reconciliation is the single most common recurring task and the foundation of a trustworthy close.
A worked example
A firm reconciles a client's checking account for March. The bank statement ends at $52,000; the books show $50,300. Investigating the $1,700 gap: a $2,000 deposit made March 31 hasn't cleared the bank (deposit in transit), a $220 bank fee wasn't booked, and there's an $80 interest credit not yet recorded. Adjusting the books for the $220 fee and $80 interest, and accounting for the $2,000 in transit, reconciles the two: $52,000 − $2,000 in transit = $50,000, and $50,300 − $220 − ... the reconciling items fully explain the difference and the account ties out.
How firms handle it today
Teams pull the bank feed, match transactions line by line against the ledger, chase down unmatched items, and document reconciling entries — for every account, every month. It's high-volume, low-judgment work that dominates close hours.
How OCTA Flow relates to bank reconciliation
OCTA Flow automates the mechanical matching: it connects to QuickBooks or Xero, matches transactions, and surfaces only the exceptions by severity, logging everything to the audit trail. Your team reviews and approves rather than matching lines by hand.
Related terms
- Reconciliation
- General ledger
- Audit trail
- Trial balance
- Month-end close
FAQ
How often should you reconcile bank accounts?
At least monthly, as part of close — high-volume accounts are often reconciled more frequently.
What causes differences in a bank reconciliation?
Timing items like deposits in transit and uncleared checks, plus unrecorded bank fees, interest, and occasional errors.
Can bank reconciliation be automated?
The matching and exception-flagging can be automated and reviewed, while judgment calls stay with your team — the model OCTA Flow uses.
See how firms automate bank reconciliation → start an OCTA Flow trial.