Key takeaways
What this article covers, in order:
- What you need before you start
- The 9 steps to reconcile a bank statement
- A worked example with real numbers
- What usually goes wrong
- How long should it take?
- Do you need to reconcile credit cards and loan accounts too?
Here's how to do a bank reconciliation in one sentence: you compare every line on the statement with the cash-at-bank account in your books, record what the bank knows that you don't, list what you know that the bank hasn't processed yet, and check the two adjusted balances agree. That's the whole job. Below is the full routine we'd teach a new bookkeeper, with a worked example you can follow line by line.
What you need before you start
Get these together first. Hunting for them halfway through is how a 20-minute job turns into an afternoon.
- The bank statement for the period, with the opening and closing balance showing. A PDF or a CSV export both work.
- Your books for the same account and the same dates. In accounting software that's the bank account register; in a spreadsheet it's your cash book.
- Last period's reconciliation report, so you know which items were still outstanding when you signed off.
- Any paperwork for odd items: remittance advices, supplier invoices, the email from the customer who said "paid today".
One more thing. Pick a clean cut-off date, usually the last day of the month, and stick to it. If the statement runs 1 Sep 2026 to 30 Sep 2026, your books need to be looked at to 30 Sep 2026 too, not to whatever day you happen to open the laptop.
The 9 steps to reconcile a bank statement
Step 1: Check the opening balances agree
Your statement's opening balance should equal the closing balance on last month's reconciliation, adjusted for the items that were outstanding back then. If last month was reconciled properly, this lines up. If it doesn't, stop here. There's no point reconciling September 2026 on top of a broken August 2026, because every difference you find will be partly last month's problem in disguise.
Step 2: Clear last period's outstanding items
Take last month's list of outstanding items (deposits not yet banked, payments not yet cleared) and find each one on this statement. Most will have cleared in the first few days. Tick them off. Anything still not cleared after a few weeks deserves a look, and anything older than a couple of months is a red flag.
Step 3: Match the money coming in
Work down the deposits on the statement and match each one to a receipt in your books. Same amount, similar date, sensible description. Watch for deposits that bundle several customer payments into one line, and card settlements where the bank deposits the net amount after fees.
Step 4: Match the money going out
Do the same for withdrawals: supplier payments, direct debits, card payments, transfers to savings. A transfer to your own savings account is not an expense. It's money moving between two of your own accounts, and it should be recorded that way on both sides.
Step 5: Record what the bank knows that you don't
These are the lines on the statement with nothing to match in your books. The usual suspects:
- account-keeping and transaction fees
- interest earned or charged
- direct debits you set up and forgot (insurance, software, phone)
- dishonoured payments and the fee that comes with them
- customer payments you didn't know had arrived
Each one needs an entry in your books, with a proper category. Don't park them in a "sundries" account to make the numbers work. That just moves the mess.
Step 6: List what you know that the bank doesn't
Now the other direction. These are entries in your books that haven't hit the statement yet. They're normal, and they're why the two balances almost never match on the day.
- Deposits in transit: money you've recorded as received but the bank hasn't credited yet, like card takings from the last evening of the month.
- Outstanding payments: payments you've recorded but the bank hasn't processed, such as an EFT scheduled late on the last day, or a cheque the supplier hasn't banked.
You don't adjust your books for these. You just list them, because they'll clear next month.
Step 7: Calculate the adjusted balances
Two small sums:
- Adjusted bank balance = statement closing balance + deposits in transit − outstanding payments
- Adjusted book balance = book balance + bank-only receipts − bank-only charges
If you did Step 5 properly, your book balance already includes the bank-only items, so the adjusted book balance is simply your updated ledger balance.
Step 8: Investigate any difference
If the two adjusted figures agree, you're done. If they don't, the gap is a clue. A difference that divides evenly by 9 often means two digits got swapped. A difference that's exactly double a transaction often means something went in as money in when it was money out. A difference that equals one transaction usually means it's missing or duplicated. Check those three before anything else.
Step 9: Sign off and keep the report
Save the reconciliation report, note who did it and the date, and lock the period if your software allows it. Next month's Step 1 depends on this month's Step 9.
A worked example with real numbers
Here's an illustrative example. Mia runs a small commercial cleaning business in Geelong. She's reconciling her business transaction account for September 2026.
Her bank statement shows a closing balance on 30 Sep 2026 of $18,640.55. Her books show cash at bank of $18,353.23. That's a gap of $287.32, and she wants to know why.
Working through Steps 3 to 6, she finds:
On the statement, not in her books (Step 5):
- monthly account fee, $15.00
- interest earned, $3.62
- direct debit for public liability insurance, $146.30
In her books, not on the statement yet (Step 6):
- card settlement for 30 Sep 2026 takings, banked 1 Oct 2026: $820.00 (deposit in transit)
- EFT to her cleaning-supplies wholesaler, scheduled 30 Sep 2026, processed 1 Oct 2026: $1,265.00 (outstanding payment)
She enters the three bank-only items in her books, then lays it out.
| Bank side | Amount | Book side | Amount |
|---|---|---|---|
| Statement closing balance | $18,640.55 | Book balance before adjustments | $18,353.23 |
| Add: deposit in transit | $820.00 | Less: account fee | −$15.00 |
| Less: outstanding EFT | −$1,265.00 | Add: interest earned | $3.62 |
| Less: insurance direct debit | −$146.30 | ||
| Adjusted bank balance | $18,195.55 | Adjusted book balance | $18,195.55 |
Check the maths yourself: $18,640.55 + $820.00 − $1,265.00 = $18,195.55. And $18,353.23 − $15.00 + $3.62 − $146.30 = $18,195.55. They agree, so September 2026 is reconciled. The $820.00 and $1,265.00 go on her outstanding list, and they're the first things she ticks off in Step 2 next month.
Notice that the original $287.32 gap wasn't one mistake. It was five ordinary items pulling in different directions. That's what most reconciliation differences look like.
What usually goes wrong
| Problem | What it looks like | Fix |
|---|---|---|
| Wrong opening balance | Difference appears before you've matched a single line | Go back and fix the prior period first |
| Transposed digits | Difference divisible by 9, e.g. $45.00 or $360.00 | Search for amounts with swapped digits |
| Reversed sign | Difference is double one transaction | Find the refund recorded as a payment, or vice versa |
| Duplicate entry | Difference equals one transaction exactly | Look for the same amount entered twice, often from a feed plus a manual entry |
| Net vs gross deposit | Card or payout deposits never match invoices | Record the gross sale and the fee separately |
| Transfer recorded once | Savings account and main account disagree | Record both sides of the transfer |
How long should it take?
For a small business with a hundred or so transactions a month, reconciling monthly with a bank feed is often a 20 to 40 minute job once the habit is set. Doing it on paper with a highlighter takes longer, and catching up six months at once takes much longer, because you've lost the memory of what each payment was for. That's honestly the best argument for doing it often: the questions are easy when they're fresh.
If your account has a lot of card takings, refunds and transfers, or more than one entity is sharing a bank account, the routine is the same but the exceptions multiply. That's a good time to bring in a bookkeeper or BAS agent to set up the categories properly, then keep it going yourself.
Do you need to reconcile credit cards and loan accounts too?
Yes. Any account with a statement from a third party can be reconciled: credit cards, savings accounts, loan accounts, PayPal balances. The steps are the same. With a credit card, remember that the balance is money you owe, so purchases increase it and payments decrease it. Statement periods on cards often don't end on the last day of the month either, so you may need to reconcile to the statement date instead.
Keep GST coding tidy while you're in there
While you're categorising the bank-only items, make sure each one carries the right GST code. Bank fees and interest usually aren't treated the same way as a supplier invoice, so don't just copy the code from the line above. Keep GST coded correctly; your BAS agent or accountant handles lodgement.
How HelloBooks helps
HelloBooks has a reconcile screen that lines your bank statement up against your ledger. Each line gets an AI match suggestion with a confidence score and a short reason for the match it picked, so you're mostly confirming, and you only work through the exceptions left over. If a match is wrong, you can unmatch it in one click.
When you're done, it produces a reconciliation report showing the opening balance, cleared items, outstanding items and closing balance, which exports as PDF or CSV. Once a period is reconciled and signed off you can lock it, and any reopening is logged. Credit-card accounts reconcile the same way.
You can connect your bank account (most Australian banks and cards are supported) or import a CSV statement if you'd rather. Transactions land in a review list where you confirm or change the category. The Free plan includes one live bank feed; Pro adds unlimited bank connections and AI auto-categorisation. There's more detail on the bank reconciliation software page and on pricing for Australia. Your bookkeeper or accountant can be invited into the same books, so they see exactly what you see.
FAQs
What's the difference between the bank balance and the book balance?
The bank balance is what the bank says is in your account on the statement date. The book balance is what your records say. They differ because of timing (payments and deposits that haven't cleared) and because of items the bank recorded that you haven't entered yet, such as fees and interest.
Should I adjust my books for deposits in transit?
No. A deposit in transit is already in your books. It's the bank that hasn't caught up. You list it on the reconciliation and expect it to clear in the first days of the next month.
What if a difference won't go away?
Check the opening balance first, then look for transposed digits, reversed signs and duplicates. If it's a small amount and you've spent a long time on it, note it, park it in a clearly named account and ask your bookkeeper or accountant to look at it. Don't let it quietly roll forward month after month.
Can I reconcile from a CSV instead of a bank feed?
Yes. Download the statement as a CSV from your internet banking, import it, and reconcile the same way. A feed just saves you the download and keeps transactions coming in daily.
How far back should I keep reconciliation reports?
Keep them with your other business records. In Australia, business records are generally kept for five years, and your accountant can tell you if anything in your situation needs longer.
Do I need an accountant to reconcile my bank account?
Not for a straightforward account. Most owners can learn this in an afternoon. An accountant or bookkeeper is worth it when the books are badly behind or the differences don't make sense after a proper search.
Do one month properly, keep the report, and next month gets noticeably easier.
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