Bank Reconciliation Basics

What is bank reconciliation?

Matching every transaction on your bank statement to a corresponding entry in your accounting software, so the two balances agree on a given date.

Why it matters

• Confirms your records are complete
• Catches duplicate transactions, missing income and fraud
• Required for accurate VAT, accounts and tax returns

The simple weekly routine

1. Connect your bank via direct feed (most UK banks support this in Xero/QuickBooks)
2. Open the bank reconciliation screen
3. For each transaction, match to an existing invoice/bill, or create a new entry
4. Use rules to auto-code recurring transactions (e.g. monthly Google Workspace)
5. Reconcile to the closing balance

Common reconciliation problems

• Duplicate transactions — usually from importing a CSV after a bank feed already pulled the data
• Wrong dates — bank feeds may pull "pending" transactions that change later
• Missing transactions — feed breaks need re-authentication every 90 days
• Foreign currency rounding — minor differences post to a Realised FX gain/loss account

Reconcile weekly. Yearly reconciliation is where bookkeeping nightmares come from.