Bank Reconciliation

Bank Reconciliation

Why It Matters

Bank reconciliation is a critical internal control. It:

• Catches bank errors (rare, but they happen)
• Identifies unrecorded fees and charges
• Flags NSF (bounced) checks
• Detects unauthorized transactions and potential fraud
• Ensures cash balance is accurate before producing reports

Frequency: Monthly at minimum. Weekly for high-volume businesses.

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Step-by-Step Reconciliation

Step 1 -- Get bank statement + QuickBooks register for the same period

Step 2 -- Open QuickBooks: Accounting > Reconcile > Select account > Enter statement ending date + ending balance

Step 3 -- Check off cleared transactions -- match every item on both documents

Step 4 -- Identify differences:

• Outstanding checks (in books, not on bank statement)
• Deposits in transit (in books, not on bank statement)
• Bank fees / NSF (on bank statement, not in books) ?*' post adjusting entries

Step 5 -- Post adjusting entries for bank-side items

Step 6 -- Confirm $0 difference ?*' Finish Now

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Common Reconciliation Errors

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Fraud Red Flags -- Stop and Escalate

• Checks made out to employees in odd amounts outside payroll
• Vendor payments to new accounts with generic names
• Multiple payments to the same vendor in one day
• Transactions without supporting documentation

These are fraud signals. Flag to your supervisor -- do not investigate alone, do not delete.