{"id":12662,"date":"2023-05-18T10:12:32","date_gmt":"2023-05-18T04:42:32","guid":{"rendered":"https:\/\/razorpay.com\/blog\/?p=12662"},"modified":"2025-05-05T14:32:06","modified_gmt":"2025-05-05T09:02:06","slug":"bank-reconciliation","status":"publish","type":"post","link":"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/","title":{"rendered":"How Bank Reconciliation Helps Businesses?"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">Bank <a href=\"https:\/\/razorpay.com\/learn\/what-is-reconciliation\/\">reconciliation<\/a> refers to the process by which the bank account balance of a business entity is reconciled with the amount recorded by financial institutions in the latest bank statement. The main objective of conducting this process is to prepare a statement recording the difference between these two.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A bank reconciliation statement ensures that all payments are processed and the required cash is deposited in the bank account. If it serves its purpose, towards the end of a financial period, the bank account statements reflecting a balance will equal the bank account\u2019s ending balance.\u00a0<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69d01a2eedc06\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69d01a2eedc06\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#What_is_a_Bank_Reconciliation_Statement\" >What is a Bank Reconciliation Statement?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#Understanding_Preparation_of_Bank_Reconciliation_Statement\" >Understanding Preparation of Bank Reconciliation Statement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#How_to_do_a_Bank_Reconciliation\" >How to do a Bank Reconciliation?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#Adjusting_Balance_Per_Books\" >Adjusting Balance Per Books<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#Benefits_of_Bank_Reconciliation_Statement\" >Benefits of Bank Reconciliation Statement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#Example_of_a_Bank_Reconciliation_Statement\" >Example of a Bank Reconciliation Statement<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/razorpay.com\/blog\/business-banking\/bank-reconciliation\/#Frequently_Asked_Questions\" >Frequently Asked Questions<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_Bank_Reconciliation_Statement\"><\/span><b>What is a Bank Reconciliation Statement?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">The<\/span> <span style=\"font-weight: 400;\">bank reconciliation statement can be referred to as the summary of all the business and banking activity drafted by a business entity. It is to reconcile the bank account balance with the internal cash record.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This statement identifies discrepancies between the business&#8217; bank account balance and the financial institution-reported balance, if there are any. A business prepares a bank reconciliation statement during financial periods which reflects withdrawals, deposits, and other parameters impacting a bank account. Business entities use this as a monetary internal control tool to avoid fraudulent activities. Further, all sorts of charges levied by a bank on an account are accounted for in a reconciliation statement.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Understanding_Preparation_of_Bank_Reconciliation_Statement\"><\/span><b>Understanding Preparation of Bank Reconciliation Statement<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Reconciliation statements are processed by an accountant once a month. In the process, the accountant compares a business entity&#8217;s book with the bank statements. It is to make sure all transactions are properly accounted for.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The frequency of conducting the process is dependent on a company&#8217;s size and number of transactions done. There are certain large companies where reconciliation of bank statements is necessary to be carried out every day to ensure smooth workflow.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Though many companies still rely on manual means of reconciliation, bookkeeping software is an option that eases work. Most of this software has the bank account of the business body integrated, helping with all records and data in one place.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"How_to_do_a_Bank_Reconciliation\"><\/span><b>How to do a Bank Reconciliation?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Firstly, one must obtain bank records. For this, one will need to access the list of transactions. Business owners will need bank statements for the last two months to complete bank reconciliation successfully. They also have to provide the closing balance of the previous month, which will be the starting number.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Now deduct checks in transit or include the deposits that the business might not have paid. This amount is referred to as the adjusted cash balance.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Add in earned interest (if there is any) or deduct any fees. Also, take into consideration the penalties and NSF (Non-Sufficient Funds) checks, the mention of which might not be in the business records.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Ensure that the cleared checks and deposits are in alignment with amounts that the bank records.\u00a0 Business owners must ensure that the ending balance must match with each other.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Lastly, examine thoroughly in case there is any error in the amounts.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Adjusting_Balance_Per_Books\"><\/span><b>Adjusting Balance Per Books<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">There can be scenarios when the balance in the cash account of a business body might need adjusting. For example, business owners might have to bear a fee that is levied by banks for keeping the account open. These fees are automatically withdrawn and processed from the business account. Hence, while drafting a bank reconciliation statement it is imperative to account for any charges taken from the account by making a journal entry.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In addition, an interest that a business earns is another thing that might need an adjustment. This interest amount enters the bank account automatically after a particular span. Hence, the accountant might need to make an entry that increases the cash reflected currently in the financial records.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">After carrying necessary adjustments in the book, the balance must be the same as that of the bank account&#8217;s ending balance. A successful bank reconciliation statement is curated only when the figures will be the same eventually.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Benefits_of_Bank_Reconciliation_Statement\"><\/span><b>Benefits of Bank Reconciliation Statement<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Identify Fraud:<\/b><span style=\"font-weight: 400;\"> A bank account statement is a vital tool that helps in identifying fraud. For instance, businesses can take steps to stop the unprincipled activity in case a check has altered which has led to substantial payments than expected. They can also detect issues like missed or double payments through bank reconciliation statements.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Recognise Unfavourable Activity:<\/b><span style=\"font-weight: 400;\"> Through bank reconciliation statements it is easy to recognise suspicious transactions and theft. Even it is easy to identify errors that can jeopardise financial reporting and tax reporting. Without conducting this process, there can be scenarios when companies are either paying too high or too less in taxes.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Get a Financial Report:<\/b><span style=\"font-weight: 400;\"> The statements usually reflect the financial standing of a business body for a specific span and help evaluate profitability. A proper reconciliation statement backs potential investors to make an apprised decision and extends other entities a vivid idea of the cash flow.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Keep a Record:<\/b><span style=\"font-weight: 400;\"> Through bank reconciliation statements, it is easy to keep a record of bank transactions, penalties and other charges in the business book. Further, keeping a proper track of business receivables and accounts payable has also become convenient.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"Example_of_a_Bank_Reconciliation_Statement\"><\/span><b>Example of a Bank Reconciliation Statement<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">A bank reconciliation statement helps in comparing transactions in financial records with transactions mentioned on a bank statement.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For instance, XYX firm holds an ending balance of \u20b940 lakhs on its record. However, the bank statement reflects an amount of \u20b950 lakhs. After assessing this scenario, the owner of XYZ firm understands that the bank has not yet received a vendor check of \u20b910 lakhs. On understanding this gap, XYZ owner adjusted the records, mentioning the check as outstanding and including this missing deposit.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Banking, as we see it, has significantly evolved.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The evolution of the fintech space has had a significant impact on businesses today.<\/span><\/p>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/?r=blog_cta_business_banking_banking_reconciliation&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">Explore RazorpayX<\/a><\/div>\n<p>&nbsp;<\/p>\n<p><strong>Read more:<a href=\"https:\/\/razorpay.com\/blog\/business-banking\/fintech-meaning-evolution-outcome\/\"> What is Fintech? Meaning, Evolution, Outcome<\/a><\/strong><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><a href=\"https:\/\/razorpay.com\/x\/\"><span style=\"font-weight: 400;\">\u00a0RazorpayX<\/span><\/a><span style=\"font-weight: 400;\"> allows business owners to open<\/span><a href=\"https:\/\/razorpay.com\/x\/current-accounts\/?utm_source=direct&amp;utm_medium=website\"><span style=\"font-weight: 400;\"> current accounts<\/span><\/a><span style=\"font-weight: 400;\">,<\/span><a href=\"https:\/\/razorpay.com\/x\/tax-payments\/\"><span style=\"font-weight: 400;\"> pay taxes<\/span><\/a><span style=\"font-weight: 400;\">, schedule payments,<\/span><a href=\"https:\/\/razorpay.com\/x\/vendor-payments\/\"><span style=\"font-weight: 400;\"> pay vendors<\/span><\/a><span style=\"font-weight: 400;\"> seamlessly and check invoices from a single dashboard. This saves valuable time and effort.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It fills the gap between advanced banking solutions and finance professionals. It allows easy accounting software integration.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With<\/span><a href=\"https:\/\/razorpay.com\/payroll\/\"><span style=\"font-weight: 400;\"> RazorpayX Payroll<\/span><\/a><span style=\"font-weight: 400;\">, businesses can automate salary payments and provide insurance policies to their employees<\/span><\/li>\n<\/ul>\n<div style=\"text-align: center;\"><a style=\"border-radius: 3px; background: #528FF0; padding: 15px; font-weight: 600; cursor: pointer; text-decoration: none; color: white;\" href=\"https:\/\/razorpay.com\/x\/current-accounts\/?r=blog_cta_business_banking_banking_reconciliation&amp;utm_source=blog&amp;utm_medium=cta\" target=\"_blank\" rel=\"noopener\" data-schema-attribute=\"\">RazorpayX-powered Current Account<\/a><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Frequently_Asked_Questions\"><\/span>Frequently Asked Questions<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<div id=\"rank-math-rich-snippet-wrapper\"><div id=\"rank-math-faq\" class=\"rank-math-block\">\n<div class=\"rank-math-list \">\n<div id=\"faq-1\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What are the common issues with Bank Reconciliations?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Common issues with bank reconciliation generally crop up when there is infrequent reconciliation. As required information is absent, it hinders the prompt redressal of problems. In addition, when a business does not track transactions on time, however, the bank applies its fees, there is a higher chance of a mismatch<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-2\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">How frequently should one do bank reconciliation?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>The frequency of preparing bank reconciliations depends on the size of the business and the number of transactions. However, in order to detect errors as quickly as possible, businesses can opt for monthly reconciliation of bank statements. Businesses can do it as frequently as they generate these bank statements.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-3\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What is the difference between a bank statement and a bank reconciliation statement?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Bank statements help clients or account holders to compare the entries in bank statements with cash book entries. On the other hand, a bank reconciliation statement helps an account holder to keep track of the bank account transactions and balance the client's book.<\/p>\n\n<\/div>\n<\/div>\n<div id=\"faq-4\" class=\"rank-math-list-item\">\n<h3 class=\"rank-math-question \">What are some of the common issues accountants find during bank reconciliation?<\/h3>\n<div class=\"rank-math-answer \">\n\n<p>Here are the common issues that come to the surface while conducting bank reconciliation:<br \/>\nChecks that are returned to business owners after getting deposited.<br \/>\nVoided checks are cleared by banks which results in double payments.<br \/>\nComing across uncleared and missing checks that are not presented to banks. <\/p>\n\n<\/div>\n<\/div>\n<\/div>\n<\/div><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Bank reconciliation refers to the process by which the bank account balance of a business entity is reconciled with the amount recorded by financial institutions in the latest bank statement. The main objective of conducting this process is to prepare a statement recording the difference between these two.\u00a0 A bank reconciliation statement ensures that all<\/p>\n","protected":false},"author":102,"featured_media":12670,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[27],"tags":[],"class_list":{"0":"post-12662","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-banking"},"_links":{"self":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/12662","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/users\/102"}],"replies":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/comments?post=12662"}],"version-history":[{"count":1,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/12662\/revisions"}],"predecessor-version":[{"id":22391,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/posts\/12662\/revisions\/22391"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media\/12670"}],"wp:attachment":[{"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/media?parent=12662"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/categories?post=12662"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/razorpay.com\/blog\/wp-json\/wp\/v2\/tags?post=12662"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}