What is bank reconciliation?
Matching bank statement entries one by one against the payments and receipts in the company's books to confirm they agree and find the cause of any differences.
In detail
Bank reconciliation confirms which invoice each receipt corresponds to and which bill each payment settles. Manual reconciliation is time-consuming and error-prone; many ERP systems can now import bank statements automatically and match them by amount, date and reference, leaving people to handle only the items that don't match.
For example
The system automatically matches 95% of this month's bank transactions; the few remaining are combined customer payments or unclear references, which the accountant confirms one by one.
How companies use it
Enabling automatic bank statement import and standardizing customer payment reference rules can significantly raise the automatic match rate.
Common misconceptions
Leaving reconciliation until month-end. The more discrepancies pile up, the harder they are to trace; reconcile weekly or even daily.
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