Bank Reconciliation: The 30-Minute Task That Could Save Your Business

You check your bank balance. You check your accounting software. The numbers don’t match. And that cold feeling creeps in: Where did the money go?

For most Houston business owners, this moment of panic comes too late. By the time they notice something’s wrong, it’s been wrong for months. The discrepancy that started as $50 has mushroomed into $5,000. And untangling the mess becomes its own full-time job.

This is what happens when bank reconciliation gets skipped. And it happens more often than anyone wants to admit.

The $14,000 Lesson

A Houston retail business discovered an employee had been writing small checks to themselves. Not large amounts that would raise alarms. Just $200 here. $400 there. Pocket change in the context of daily operations.

Eight months later, the total topped $14,000.

Monthly bank reconciliation would have caught it in month one. A 30-minute review would have flagged a check made out to an unfamiliar name. Instead, the theft continued until a year-end audit revealed the pattern.

That’s the thing about reconciliation. It’s not exciting. It’s not strategic. But skipping it is like leaving your front door unlocked in a neighborhood where you don’t know your neighbors.

What Bank Reconciliation Actually Does

Think of reconciliation as a translation exercise. Your bank speaks one language. Your accounting software speaks another. Reconciliation ensures they’re telling the same story.

Differences naturally occur:

• A check you wrote last week hasn’t cleared yet
• A deposit is still in transit
• The bank charged a fee you haven’t recorded
• A customer’s payment bounced
• Someone made an unauthorized withdrawal

Reconciliation identifies every difference and explains every dollar. At the end, your adjusted book balance should exactly match your adjusted bank balance. Any unexplained gap means something needs investigating.

The 7-Step Process

Step 1: Gather Your Documents

Pull together:

• Bank statement for the period
• Your accounting records
• Prior reconciliation (to verify the beginning balance)

Step 2: Verify Beginning Balances

Your book’s beginning balance should match last month’s ending reconciled balance. If it doesn’t, stop. Something changed that shouldn’t have.

Step 3: Match Transactions

Go line by line through the bank statement. Mark each transaction as matched in your records:

• Deposits
• Cleared checks
• Electronic payments
• Bank fees
• Interest earned
• Automatic transfers

Flag anything that appears on only one side or shows different amounts.

Step 4: Identify Outstanding Items

Outstanding checks are checks you’ve written and recorded but that haven’t cleared the bank yet. They reduce your bank balance but are already in your books.

Deposits in transit are deposits you’ve recorded but the bank hasn’t processed yet.

These aren’t errors. They’re timing differences. They should clear in subsequent periods.

Step 5: Record Missing Transactions

Bank fees. Interest earned. Automatic payments you forgot. Bounced checks. Direct deposits. These items appear on the bank statement but not in your books.

Record them now to bring your books current.

Step 6: Investigate Discrepancies

When amounts don’t match or transactions appear that you don’t recognize:

• Verify the amount is correct
• Look for transposed numbers
• Check for duplicate entries
• Investigate unknown transactions immediately

Don’t assume. Verify.

Step 7: Complete the Reconciliation

Calculate:

Bank Statement Balance

• Deposits in transit

• Outstanding checks = Adjusted Bank Balance

Book Balance

• Interest/deposits not yet recorded

• Bank fees not yet recorded +/- Error corrections = Adjusted Book Balance

These two numbers must match. If they don’t, you have an unresolved discrepancy.

A Real Example

Starting Point:

• Bank statement ending balance: $45,280.00
• Book balance: $47,125.00
• Difference: $1,845.00

Outstanding Items:

Item	Amount
Check #1042 (outstanding)	-$2,400.00
Check #1045 (outstanding)	-$875.00
Deposit in transit (1/31)	+$1,500.00

Bank Adjustments: $45,280.00 + $1,500.00 - $2,400.00 - $875.00 = $43,505.00

Items to Record in Books:

Item	Amount
Bank service fee	-$45.00
Returned check (NSF)	-$3,500.00
Interest earned	+$25.00
Error correction	-$100.00

Book Adjustments: $47,125.00 - $45.00 - $3,500.00 + $25.00 - $100.00 = $43,505.00

Result: Both adjusted balances equal $43,505.00. Reconciliation complete.

Why Monthly Matters

A transposed number ($1,250 recorded as $1,520) is easy to spot when you’re reviewing 30 transactions. Try finding it in 12 months of activity. The needle disappears in the haystack.

Monthly reconciliation catches errors while memories are fresh. It identifies unauthorized transactions before more damage occurs. It ensures your financial statements reflect reality.

Most importantly, it takes minutes when done regularly. Skip it for six months, and that 30-minute task becomes a multi-hour project.

The Problems That Pile Up

Stale outstanding checks: Checks outstanding for more than 90 days may never clear. Follow up with the payee or consider voiding and reissuing.

Missing documentation: You find transactions you don’t recognize. Without receipts, you can’t verify what they were for. This creates categorization problems and potential audit issues.

Personal transactions in business accounts: Mixing personal and business transactions creates reconciliation headaches and can jeopardize your liability protection.

Duplicate entries: The same transaction recorded twice throws off your balance. Common with manual entry of transactions that also import automatically.

“Small” differences ignored: A $5 discrepancy today might be hiding a larger issue. Never leave a reconciliation unbalanced, even for small amounts. Five dollars unexplained this month becomes fifty unexplained next year.

Warning Signs You Need Help

• You haven’t reconciled in three or more months
• You consistently have unexplained differences
• You’re finding transactions you don’t recognize
• Your book balance seems disconnected from reality
• You’re preparing for an audit or loan application

If your last reconciliation was “sometime last year,” you’re already behind. The question isn’t whether problems exist. It’s how many have accumulated.

The Bottom Line

Bank reconciliation isn’t glamorous. It won’t grow your revenue or land new clients. But skipping it leaves your business vulnerable to errors, fraud, and financial statements that lie to you.

Thirty minutes a month. That’s the investment that stands between you and a $14,000 surprise.

At EZQ Group, we perform monthly bank reconciliations as part of our bookkeeping services. We catch discrepancies, record missing transactions, and maintain the clean records that give you confidence in your numbers.

Need help getting your accounts reconciled? Contact us to discuss your bookkeeping needs.