What reconciliation means and why you do it
Reconciliation is the process of comparing what your bank says you have against what your own records show. You are looking for transactions that appear in one place but not the other, and for math errors. The goal is to find out whether your balance is actually what you think it is.
Most people reconcile monthly, when the statement arrives. You might do it more often if you write many checks, use multiple payment methods, or need to track spending closely. The process takes 15 to 45 minutes depending on how many transactions you have and how organized your records are.
Reconciliation catches mistakes before they become problems. A bank error in your favour might disappear when the bank notices it. An error against you costs you money. A missing transaction you forgot about can make you overdraw without warning. Regular reconciliation keeps you from bouncing checks or missing payments because you thought you had more money than you actually do.
Key Takeaways
- Start with the ending balance on your bank statement and adjust it for checks you wrote that have not cleared yet and deposits the bank has not recorded.
- Compare every transaction on the statement line by line against your own records—cheques, transfers, ATM withdrawals, fees, and interest.
- If your adjusted bank balance does not match your adjusted personal balance, look for a transaction that appears in one place but not the other, or a math error.
- Uncleared cheques and deposits in transit are normal and expected; they explain most differences between your balance and the bank's.
- Once the two balances match, update your records to reflect any bank fees or interest you did not know about.
Gather your statement and your records
Pull out your most recent bank statement—the one the bank mailed or emailed to you. You will also need your own records of what you have spent and deposited. This might be a checkbook register, a spreadsheet, a notebook, or entries in your banking app.
The statement covers a specific date range, usually one month. It shows the opening balance (what you had at the start), every transaction the bank processed, and the closing balance (what the bank says you have now). Your personal records should cover the same period, though they may include transactions you recorded but the bank has not processed yet.
If you use online banking, you can often read a statement as a spreadsheet or PDF. This makes it easier to compare line by line. If you only have a paper statement, a pen and a printed checklist work just as well.
List transactions the bank has not processed yet
Look through your personal records for transactions you recorded but do not see on the bank statement. The most common ones are cheques you wrote that have not cleared, and deposits you made near the end of the month that the bank has not recorded yet.
Write down each one: the date you recorded it, what it was for, and the amount. For cheques, include the cheque number. For deposits, note whether it was cash, a cheque, or a transfer. These are called outstanding items or items in transit.
Cheques can take anywhere from one day to two weeks to clear, depending on the bank and whether it is a local cheque. Deposits made after the bank's daily cutoff time (usually 2 or 3 p.m.) may not show up until the next business day. Deposits made on weekends or holidays will not appear until the next business day the bank is open.
Adjust the bank's balance for items in transit
Start with the closing balance shown on your bank statement. This is the number the bank says you have. Now adjust it:
Subtract any cheques you wrote that have not cleared yet. Add any deposits you made that the bank has not recorded yet. The result is what your balance should actually be right now, accounting for things that are on their way.
Write this out step by step so you can see where each number came from:
| Bank statement closing balance | $2,450.00 |
| Minus: Cheque #1047 (not yet cleared) | −$125.00 |
| Minus: Cheque #1048 (not yet cleared) | −$89.50 |
| Plus: Deposit made Friday (not yet recorded) | +$300.00 |
| Adjusted bank balance | $2,535.50 |
This adjusted balance is what you should have in your account right now, assuming no other errors exist.
Adjust your personal balance the same way
Now look at your own records and find the most recent balance you recorded. This is usually the balance you wrote down after your last transaction. Adjust it for anything the bank has recorded that you have not yet entered in your records.
The most common items are bank fees (monthly maintenance fees, overdraft fees, ATM fees), interest the bank paid you, and automatic payments or transfers you forgot to record. Go through the bank statement line by line and mark off each transaction as you find it in your records. Anything on the statement that you did not mark off needs to be added to your personal records.
Once you have entered all the bank's transactions into your records, calculate your new personal balance. This should now match your adjusted bank balance.
Compare the two adjusted balances
If your adjusted personal balance equals your adjusted bank balance, reconciliation is complete. You have found all the differences and your records are accurate.
If they do not match, the difference is the amount you need to find. Write down the difference and look for a transaction that might explain it. Common culprits are a cheque amount you recorded wrong, a deposit amount you recorded wrong, a transaction you recorded twice, or a transaction you forgot to record at all.
Go through the statement again, this time checking the amounts carefully. A cheque for $150 that you recorded as $15 would create a $135 difference. A deposit for $500 that you forgot to record would create a $500 difference. If the difference is an even amount like $25 or $50, it is often a single transaction you missed.
If the difference is an odd amount like $17.43, it might be a fee or interest charge you did not know about. Check the statement for any line items labeled "fee", "charge", "interest", or "adjustment".
Update your records and keep them current
Once the two balances match, write down any transactions from the bank statement that were not in your personal records. This includes fees, interest, automatic payments, and transfers. Update your balance to reflect these items so your records stay accurate going forward.
If you use a checkbook register, cross off each cheque and deposit as it clears on the statement. If you use a spreadsheet or app, mark each transaction as reconciled. This makes it easier to spot what has cleared and what has not the next time you reconcile.
Keep your bank statement and your reconciliation notes together for at least one year. If a dispute comes up later—a cheque that was supposed to clear but did not, a charge you do not recognize—you will have the proof of what happened and when.
Frequently Asked Questions
What if I find a transaction on the bank statement that I did not make?
Contact your bank right away. Unauthorized transactions should be reported within 60 days of the statement date to protect yourself. The bank will investigate and may reverse the charge while they look into it. Keep a record of when you reported it and who you spoke to.
How long should I wait before assuming a cheque will not clear?
Most cheques clear within three to five business days. If a cheque has been outstanding for more than two weeks, contact the person or business you sent it to and ask whether they received it. If they did not, you may need to stop payment on the old cheque and issue a new one.
Can I reconcile my account using my banking app instead of the paper statement?
Yes. Most banking apps show the same transactions as the paper statement, and some apps have a built-in reconciliation tool. The process is the same: compare what the app shows against your own records, account for items in transit, and adjust both balances until they match.
What does it mean if my balance is off by a few cents?
A small difference like $0.01 or $0.05 is usually a rounding error in how you recorded a transaction, or interest the bank paid that you did not know about. Check the statement for any interest deposits. If you find one, add it to your records and the balances should match.
Do I have to reconcile every month?
Monthly reconciliation is standard practice, but you can do it more or less often depending on your needs. If you write many cheques or use your account heavily, monthly is safer. If you rarely use the account, quarterly or annual reconciliation may be enough. The important thing is doing it regularly enough to catch errors before they cause problems.