Bank Reconciliation Step by Step

Hi could someone run me through a step by step set of instructions of how to reconcile my bank? I have tried following the instructions but cannot make sense of them. When I select reconcile I set the dates and balances from my statement. Then I hit GO and the difference is shown. What happens next?

The reconciliation tool will just tell you what the difference is in the balance between two dates, based on the opening and closing balance you provide from your bank statement.

To actually find where the balance goes out it’s a case of trial and error. So basically you work back to the date when you know the balance on QF matches your bank statement, and then iterate forward maybe 1 week, 2 weeks at a time until the balance no longer matches. Using this method you should be able to quickly zero in on where the balance discrepancy occurs and correct any transactions for that period.

Sorry I am a bit lost.

In your QuickFile view of the bank statement can you find a date on which the balance agrees with your actual bank statement?

No the balances are different to each other on each date in the month.

Then you would need to go back previous months until you can locate a day upon which the bank balances. From there work forward until the balance goes out, and at that point you know that the transactions for that day are incorrect.

Ok so if the reconcile tells me I am say £17,000 over is there a way of seeing how this figure is calculated or where it lies. In other words what do I do with this figure? Sorry for being a pain but I am really new to all this as I used to reconcile from a manual cash book to my statement.

If it’s saying £17,000 over, it means you have transactions to the value of £17,000 more in your QuickFile account than you do on your statement, which suggests some have probably been entered in error.

You would need to then try and narrow down the date range to locate the error.

For example, if you tried 01/05/2017 to 31/05/2017, try a small range such as 01/05/2017 to 14/05/2017. If the error is still there, you know it’s in the smaller date range.

To expand on that, I’ll do the following:

  • 01/05/2017 -> 31/05/2017 - £100.00 Over
  • 01/05/2017 -> 14/05/2017 - £100.00 Over
  • 01/05/2017 -> 07/05/2017 - Balanced, which means the error is between 08/05/2017 and 14/05/2017

I hope that helps?

Would it not mean that there are £17,000 worth of cheques written that at the statement date were not out of my bank? The Quickfile balance is more accurate as I record a payment in the bank as soon as a cheque is written. There is no error as such?

Ideally the bank statement view on QuickFile should match your actual bank statement. But if this how you use your account, then that could very well be the case.

But how would it match if I write cheques on 28th of a month for £30,000 to all suppliers then they will never show on a statement 3 days later or at least not all of them will. On the other hand is it not right to record the payment in quickfile as soon as I write the cheque and tag it to the supplier invoice?

Should I not be tagging payments as I go along? Should I only tag when I receive my bank statement and know they are out of the bank?

You may wish to use a holding account for this, so it doesn’t necessarily affect your bank statement view until it happens in the bank.

There’s more details in my colleague’s post here:

This would help keep your bank account accurate, but also keep a record of the cheques too.

Ok so then when a cheque come out of my bank di I enter it again in my current account and then tag it to the cheque holdings account. When I tag it do I select payment to a supplier or how do I tag it?

If you click into the post I mentioned above, @Glenn has outlined it there, from the perspective of paying a supplier.

But essentially, your bank statement view should mirror your actual bank statement. If it’s on your bank statement, it should be entered. You would use the holding account is track any pending cheques.

Ok if I set up a cheque holding account now what opening balance do I give it?

This would depend on your own circumstances and your current situation, and not really something I’m able to advise on I’m afraid. I would run this past your bookkeeper if you’re unsure as they would have a better understanding of your current position.

What I am saying is do I start at 0.00, the figure on my bank account today or the figure that should be in the bank if all cheques were cleared?

Does this also mean that when I transfer the current account will not show a cheque ref number or who it was paid to. It will only show transfer to holding?

I’d start it with a zero opening balance and just accept that things will only come back into sync once your current set of pending cheques has cleared. If you like you could move any current uncleared cheque payments to the new account, either by changing the bank account on each payment or just by transferring the value across in one lump (which would make it correct from now forwards).

The payment linked to the invoice will be the one from the cheque holding account, the point when a cheque clears will just be a transfer between accounts not linked to any particular invoice, though you can of course include the cheque number and client name in the transaction description or notes if you wish.

1 Like