How to Do a Bank Reconciliation: A Step-by-Step UK Guide

To reconcile a bank statement, you compare every line on the statement with the entries in your books, add anything the bank knows about that you don't, list the items still in transit, and check that both sides arrive at the same adjusted balance. That's the whole job. Below is how to do a bank reconciliation the way we'd teach a new bookkeeper, with a worked example you can follow line by line.

Why bother? A quick reality check

It's 3 Oct 2026. Hannah, who runs a dog-grooming salon in Bristol, opens her banking app and sees £9,106.40. Her bookkeeping software says £9,348.55. Neither number is wrong, exactly. They're just answering different questions.

The bank shows what has actually cleared through the account. Your books show what you've recorded, including things the bank hasn't caught up with yet. Reconciling is how you prove the gap is made of explainable items and not a missing payment, a duplicated bill or someone helping themselves.

Do it regularly and it takes minutes. Leave it for a year and it takes a weekend and a lot of tea.

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, as a PDF or a CSV download, covering the full month or whatever period you're reconciling.
• Last period's closing reconciled balance. This is your anchor. If last month didn't reconcile, fix that first.
• Your books for the same period, ideally with every transaction already categorised.
• A list of anything you know is in transit: cheques you've written that haven't been cashed, takings paid in on the last day, card settlements due in a day or two.

Step 1: Pick the period and check the opening balance

Choose the period end that matches your statement, say 30 Sep 2026. Then compare the statement's opening balance with the closing balance you agreed last time.

For Hannah, the statement opens on 1 Sep 2026 at £8,420.15, and her Aug 2026 reconciliation closed at £8,420.15. Good. They agree, so any problem this month is genuinely in this month.

If they don't agree, stop. Something in an earlier period has been edited, deleted or posted with the wrong date. There's no point reconciling Sep 2026 on top of a broken Aug 2026.

Step 2: Match the statement lines to your books

Work down the statement and find each line in your books. Same amount, same direction (money in or money out), date close enough to make sense. Tick them off on both sides.

Most lines will be obvious. Card takings, the rent, the energy direct debit, a customer paying an invoice. The fiddly ones are usually:

• Batched deposits. Three customer payments of £45, £60 and £75 might arrive as one £180 credit from your card terminal provider.
• Net amounts. Settlements that arrive with fees already taken off.
• Similar amounts on different dates. Two £29.99 subscriptions in the same month look identical until you check the payee.

Take your time with these. A wrong match is worse than no match, because it hides the real problem.

Step 3: Record what the bank knows and you don't

Once matching is done, you'll have some statement lines with nothing in your books. Typical culprits:

• Bank charges and card fees
• Interest received
• Direct debits you forgot to record
• A customer who paid by bank transfer without telling you

These are real transactions that belong in your books. Add them now, with a sensible category, dated as they appear on the statement.

Hannah finds three:

Step 4: List what you know and the bank doesn't

Now look the other way. Which entries in your books haven't hit the bank yet? These are timing differences, and they're completely normal.

• Deposits in transit. Hannah's card takings from Wednesday 30 Sep 2026, £360.00, settle into the bank on 1 Oct 2026.
• Unpresented cheques. She paid a supplier of shampoo and towels by cheque for £148.50. It's been posted but not cashed yet.

Don't add anything to your books here. These items are already recorded correctly. You're just listing them so the maths works.

Step 5: Do the sum on both sides

This is the bit people skip, and it's the bit that proves the reconciliation. You adjust each balance for the items the other side knows about, and the two adjusted figures must agree to the penny.

Bank side

Books side

Both come to £9,317.90. Sep 2026 is reconciled. Once the three missing items are posted in Step 3, her books balance actually becomes £9,317.90, and the only difference left between books and bank is the £211.50 net timing (£360.00 in, £148.50 out), which unwinds on its own in early Oct 2026.

Step 6: If it doesn't balance, investigate in this order

If the adjusted figures don't agree, don't force it with a "rounding" entry. Work through the usual suspects:

1. Is the opening balance still right? Someone may have edited last month after you reconciled it.
2. Search for the exact difference. A missing £42.00 often turns out to be a single £42.00 transaction.
3. Halve it. A difference of £84.00 can mean a £42.00 item posted as money in when it was money out.
4. Divide it by 9. If it divides evenly, look for transposed digits, like £1,450 typed as £1,540 (a £90 difference).
5. Check the dates. An item dated 1 Oct 2026 in your books but 30 Sep 2026 on the statement will sit in the wrong period.
6. Look for duplicates. Especially if you've imported a CSV and also have a live feed running.

If you've been through all six and you're still out, park the difference in a clearly named suspense account with a note, finish the rest, and come back with fresh eyes. Or ask your bookkeeper. A second pair of eyes finds these quickly.

Step 7: Sign off, keep the report and lock the period

When it balances, save a reconciliation report showing the opening balance, the cleared items, the outstanding items and the closing balance. Then sign it off with your initials and the date.

Lock the period if your software allows it. Locking stops anyone (including you, at 11pm, in a hurry) from changing a reconciled month without it being obvious. If something genuinely needs changing later, you reopen it on purpose and the change is recorded.

Next month, check that £148.50 cheque clears. If it's still sitting there in three or four months, chase the supplier. Old uncleared cheques are their own little headache.

Common mistakes we see

• Reconciling to the app balance instead of the statement. The app balance moves every hour. Use the statement closing balance for the period end date.
• Ticking items because the amount matches. Check the payee too. Two £150 payments to different people are not the same payment.
• Deleting a bank line to make the numbers work. If a line is on the statement, it happened. Find out what it was.
• Forgetting the other accounts. Savings accounts, the business credit card and any payment-processor balance all need reconciling as well.
• Never clearing the outstanding list. A cheque or deposit that's "in transit" for months isn't in transit. Something has gone wrong.

A one-page checklist you can reuse

• [ ] Statement downloaded for the full period
• [ ] Opening balance agrees with last month's reconciled closing balance
• [ ] Every statement line matched or added to the books
• [ ] Bank-only items (fees, interest, missed direct debits) recorded
• [ ] Outstanding items listed with dates and amounts
• [ ] Adjusted bank balance equals adjusted book balance
• [ ] Any unexplained difference parked with a note, not hidden
• [ ] Reconciliation report saved
• [ ] Period signed off and locked
• [ ] Last month's outstanding items checked again

How HelloBooks helps

You can connect your bank through Open Banking (most UK banks and cards are supported), or import a CSV statement if you prefer. Transactions land in a review list where you confirm or change the category.

On the reconcile screen, HelloBooks lines your bank statement up against your ledger and puts an AI match suggestion on each line, with a confidence score and the reason it picked that match. You accept the good ones and work through the exceptions that are left. If a match is wrong, you can unmatch it in one click.

When the period balances, you get a reconciliation report with the opening balance, cleared items, outstanding items and closing balance, which you can export as PDF or CSV. Once it's signed off, you can lock the period, and any reopening is logged. Credit-card accounts reconcile the same way. There's more on the bank reconciliation software page, and the UK pricing page shows what each plan includes.

FAQs

How long should a bank reconciliation take?

For a small business with 50 to 150 transactions a month, done monthly, 20 to 45 minutes is realistic once you're in the habit. The first one after a long gap takes much longer, mostly because you're digging up old paperwork.

Should I reconcile to the statement date or the end of the month?

Reconcile to the date your books need, which is usually the month end. If your bank's statements run to an odd date, download a transaction list or CSV that ends on the last day of the month instead.

What's the difference between an unpresented cheque and a deposit in transit?

An unpresented cheque is money you've paid out by cheque that the recipient hasn't banked yet, so your books show it but the bank doesn't. A deposit in transit is money you've recorded as received that the bank hasn't credited yet. They push the adjusted bank balance in opposite directions.

Can I just adjust the books to match the bank?

Only for genuine transactions the bank shows that you missed, like fees or interest. Never post a balancing figure to make the numbers agree. That hides errors and, occasionally, fraud.

Do I need to reconcile a savings account that hardly moves?

Yes, but it's quick. Check the interest and any transfers once a month and you're done in two minutes.

Does reconciling help at year end?

Very much. Clean, reconciled books make tax time easier, and your accountant handles the filing with far fewer questions for you.

Pour the tea, open last month's statement and give it a go. The second month is always easier than the first.

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