Why You Should Reconcile Your Bank Account Every Month

Bank reconciliation means comparing what the bank says happened against what your books say happened, and explaining every difference.

It sounds like an accounting formality. It is actually the only routine check that catches money problems from both directions.

What it finds

Receipts you never recorded. A customer paid, nobody entered it, and somebody is still chasing them. This is the most embarrassing thing reconciliation prevents.

Payments made twice. Far more common than people expect, particularly with vendors who send reminders.

Charges you did not know about. Fees, penalties, an EMI that went up.

Cheques that never cleared. Issued, recorded as paid, and still sitting uncashed months later.

The method

Start from the closing balance on the statement. Add back cheques you have issued that have not yet cleared. Subtract deposits that have not yet credited. The result should equal your book balance.

If it does not, the difference is a real thing that happened and was not recorded. Find it rather than adjusting to make it match.

Why monthly

A difference found within a month has context. Somebody remembers the transaction. The same difference found in March, for a payment in July, is archaeology.

The habit

Fix a date, early in the month, on somebody's actual calendar. Reconciliation that happens when there is time never happens, because there is never time.