What is a Bank Reconciliation?

A Bank Reconciliation is simply a process that matches your Money In and Money Out Records with your Bank Account. 

It is an important process because it provides you with a check as to the accuracy of your records and can therefore save your accountant a lot of time at the end of the year.

The balance of your bank account may be different from your records because someone hasn’t banked the cheque you sent to them, or bank charges have been applied but you haven’t recorded them as you haven’t seen your statement. Or maybe someone has paid a direct deposit into your bank that you haven’t recorded.

You need to record your Opening Bank Balance when you first start using the program and then the program will automatically track the Balance per your Records.

The monthly Bank Reconciliation is simply checking the deposits and payments on your Bank Statement against your records and making sure that everything on your bank statement is in your records.

Sometimes there are items in your records that are not on your bank statement, such as cheques you have posted that have not been banked by the persons you sent them to.

These are called ‘outstanding’, ‘un-presented’ or ‘uncleared’ items, and when your Bank Statement Balance is adjusted to take these into account, your Bank Balance should be the same as your Records Balance.

To process your Bank Reconciliation, click on the Bank Reconciliation tab and a ‘wizard’ will take you step by step through the bank reconciliation process. 

If you are doing a Bank Reconciliation for the first time, ensure that the month you have selected is the first month of records that you want to reconcile. 

The wizard will take you to the Opening Balance. On later occasions the Opening Balance wizard can be accessed from the Settings button, but you should only ever need to record your Opening Balance when you first start using the program.
 

Record your Opening Bank Balance:

Your Opening Bank Balance is the balance that would actually be in the bank if all deposits that have been put into the bank and all cheques written on or before the date you are starting to use the program appeared on your bank statement.

If you have not previously recorded an Opening Bank Balance you will have the opportunity when you do your first reconciliation.

1. 1. Record your Closing Bank Statement Balance for the month immediately preceding the month of your first reconciliation (or $0 if you are reconciling a new account.)
2. 2. Click on [Next] to continue.
   
   • - If you are unsure at any stage, click on the [Tutor] button to view a tutorial on the Bank Reconciliation process.
3. 3. This brings us to the Uncleared Deposits (Money In) page where you need to record any deposits from previous months that have not yet appeared on your Bank Statement.
   
   • - This is unusual with Bank Deposits but sometimes might occur. If it does, you only need to record the total deposit, not the individual transactions as we only need the amount to match the amount that appears on our bank statement.
   • - Simply record the last day of the month in Day, tab to Total Amount and record the amount of the deposit. Allocate the deposit to any Allocation Column (it is before your records commence so should not affect your reports) and then record the amount in the Bank Deposits column. 
4. 4. Click on [Next] to go to the page for recording any Uncleared Payments. This is more common and will occur when you send a cheque to someone and they don’t bank it until after the end of the month.
5. 5. Record any Bank Payments from previous months that have not yet appeared on your Bank Statement. Remember to record the cheque number as well as the amount in the Total Bank Payments column.
6. 6. When you have recorded all uncleared deposits and payments, click on [Save] to save your reconciled Opening Bank Balance.

Your Opening Bank Balance will now be displayed in the first line of the My Records information on the Bank Reconciliation window.

If you wish to change between the manual and ‘downloaded statement’ options, or process your Opening Bank Balance again, click on the [Settings] button from the Bank Reconciliation window.

Reconciling to your Paper Bank Statement

Click on the Bank Reconciliation tab.

The opening page will show the current balances from both your Cashflow Manager Records and your Bank Records together with the Discrepancy.

To begin reconciling your records to your bank statement, click on [Next].

Step 1: Closing Bank Balance

Type the closing bank statement balance for the month in the box provided. This is the balance on your bank statement after the last transaction for the month. (Hint: if the balance is in overdraft, record the amount as a minus.)

Click on [Next] to continue.
 

Step 2: Reconcile Money In (Deposits)

The Reconcile Deposits window lists all the deposits entered in the Money In Record.

Check the deposits on your Bank Statement against the list of Deposits. When the deposit on your Bank Statement agrees with the deposit on your list, click in the checkbox at the right side of the deposit in the list. Tick them off on your Bank Statement as well.

If a deposit on the list differs from the amount on the bank statement, it may be caused by an error in the bank deposit or the entry in your Money In Record. 

If it is an error in the deposit addition, a correction should appear on your bank statement a few days later. The two amounts added together should equal the deposit on your list. If so, click in the checkboxes for the two amounts. If the error is in your Money In Record correct the entry.

Any entries left un-ticked should correspond to the deposits that have been put into the bank too late to appear on the bank statement for the month. This will be rare but may occur on the last day of the month.

Generally the deposits listed will be those that are outstanding i.e. have not yet appeared on your bank statement. The Reconcile View provides the opportunity to vary the list.

Once you have checked all your deposits, click on the [Next] button. 

The Allocate Money In window will appear so you can record any transactions you have discovered on your bank statement that have not been entered into the program without having to leave the Bank Reconciliation process. As you are entering these transactions during the Bank Reconciliation process they will automatically be treated as reconciled.

When you have finished, click on [Next] to continue. 

Step 3: Reconcile Money Out (Payments)

The Reconcile Money Out window lists all amounts recorded in the Total Bank Payments column of your Money Out Record. 

Check the debits on your Bank Statement against the transactions in your Reconcile Money Out list. When you get a match, click in the checkbox at the right side of the payment in the list and tick the entry on your Bank Statement.

If a cheque on the list differs from the amount on the bank statement, you have probably made an error on your cheque stub. Leave the transaction unchecked. When you have completed the rest of the reconciliation you will need to correct this in your Money Out Record and then redo the Bank Reconciliation that should only require matching of this transaction.

Any entries left un-ticked should correspond to the cheques you have written that have not yet been presented at the bank. The total of these entries will be displayed as Payments Not Shown in the Bank Statement information section on the Bank Reconciliation screen.

Any cheques that are not reconciled in the current month will automatically show up in the following month's Reconcile Money Out list. Generally the payments listed will be those that are outstanding i.e. have not yet appeared on your bank statement. The Reconcile View provides the opportunity to vary the list.

Once you have checked all your deposits, click on the [Next] .

The Allocate Money Out window will appear so you can record any transactions you have discovered on your bank statement that have not been entered into the program without having to leave the Bank Reconciliation process. As you are entering these transactions during the Bank Reconciliation process they will automatically be treated as reconciled.

When you have finished, click on [Next] to continue.
 

Step 4: Balance and Lock your Records

The summary information from both your records and the bank will be displayed. If you reconcile then the Records Balance and the Bank Balance will agree

Click on the [Finish] button to continue.

A message will ask whether you wish to lock your records at this time. When you have completed recording transactions for any month and it has been reconciled it is advisable to lock your records to prevent any accidental changes that might affect your records.

To lock your records, click on [Lock]. If you do not want to lock your records at this time, click on [Don’t Lock].

If there is a discrepancy between your records and bank statement, the [Finish] button will be replaced by a [Next] button that will save the deposits and payments you have checked off to give you the opportunity to find what is causing the discrepancy without having to check everything off when you process your Bank Reconciliation again. 

When you lock your records a padlock will appear next to the Account Name in your Money In, Money Out, Bank Reconciliation and Cash Reconciliation sections.

If you need to unlock your records for any reason such as changing an allocation, go to the Bank Reconciliation screen and click on the [Unlock] button.
If you unlock a month and change anything in the Bank Deposits column of your Money In Record, or the Total Bank Payment column in your Money Out Record this will affect your reconciliation, not only for this month but for any future month as well.

Therefore we recommend that you print your Bank Reconciliation report every month.

Please also see the Tips and Tricks section regarding cancelling or amending cheques from a previous month.

Please Note: The Bank Reconciliation process has Tabs that allow you to select a different step in the process. However, we highly recommend that you use the [Next] button and only use the Tabs to make changes such as changing the Bank Statement balance.