Tips for improving your bank reconciliation process

Bank reconciliation is a high priority if you want to maintain financial accuracy and ensure that your financial records match bank data in your statements. That’s likely why CFOs around the world are investing in improving the bank reconciliation process – it prevents costly errors, improves cash planning and helps keep financial records accurate. 

In this article, we'll explore best practices that can help you streamline bank reconciliation and outline how advanced software can accelerate and improve your workflow.

Key highlights:

• Bank reconciliation is the process of comparing bank statements with general ledger balances to identify and resolve discrepancies.
• A structured bank reconciliation process improves cash visibility, reduces errors, and supports accurate financial reporting.
• Automating reconciliation helps finance teams scale, shorten close timelines, and maintain audit-ready controls as transaction volumes grow.
• ZoneReconcile streamlines bank reconciliation in NetSuite by automating matching, handling complex transactions, and improving accuracy across accounts and entities.

What is bank reconciliation?

Bank reconciliation (and credit card reconciliation) compares the balance on your company’s bank statement with the balance recorded in your accounting system or general ledger. The goal is to ensure these two sets of records match and, when they don’t, identify and resolve any discrepancies. Bank reconciliation is necessary for sound cash flow management and accurate record keeping.

With regular reconciliation, enterprises can:

• Discover errors 
• Undercover missing transactions 
• Prevent fraudulent activity

Taking control of your true cash situation by reconciling your bank and general ledger balances frequently gives you the data you need to make informed decisions about investments, payroll and other financial commitments.

Let’s consider a hypothetical business: 

Shasta Automotive is performing a bank reconciliation at the end of January. According to their bank statement, the company’s account balance is $88,500. However, their internal accounting records show a balance of $97,100. That’s when the company’s accountant steps in to identify and resolve this discrepancy.

Upon reviewing the bank statement, the accountant found $150 in bank fees that were not yet recorded in the company’s accounting system. Additionally, they find $8,750 worth of deposits in transit in the form of three check deposits that have not yet cleared the bank. To reconcile the accounts, the accountant adds bank reconciliation statements to the general ledger entry to account for the deposits in transit and unrecorded bank fees. 

Bank reconciliation process steps explained

Most finance teams know they need to reconcile bank accounts regularly, but understanding the individual bank reconciliation steps is what separates teams that close books in days from those stuck reconciling for weeks. Each step in the process serves a specific purpose – catching timing differences before they become reporting errors, surfacing fraudulent activity before it scales and ensuring your cash position is actually what your accounting system claims it is.

Here's how the bank reconciliation process works when executed properly:

1. Obtain bank statements

Your bank statement is the starting point for reconciliation, but pulling statements manually from online banking portals is where most teams waste time. If you're downloading PDFs, converting them to CSV files and manually uploading them into your accounting system, you're introducing delays and potential errors before reconciliation even begins. 

Some banks provide automated feeds that push transaction data directly into your ERP, eliminating the manual download process entirely. The key is ensuring you're working with complete, up-to-date statements that include all transactions for the period you're reconciling. Missing even a single day of transactions throws off your reconciliation and forces you to restart the process once the data arrives.

What to do:

• Download statements for all bank accounts, credit cards and payment service providers (PayPal, Stripe, etc.) for the period being reconciled
• Confirm the statement period matches your accounting close period to avoid reconciling partial months
• If your bank offers direct data feeds or API connections, set those up to eliminate manual downloads
• Verify the statement includes all transaction types – deposits, withdrawals, fees, interest, reversals
• Keep statements organized by account and period so you can reference them during audits

2. Pull general ledger balances

Your general ledger should reflect every cash transaction your business has recorded – but that only happens if your team actually entered them all. This is where discrepancies surface: checks written but not recorded, deposits logged incorrectly and bank fees nobody told finance about. 

Before you start matching transactions, you need a complete picture of what your accounting system thinks happened versus what your bank statement shows actually happened.

Pull GL balances for the same date range as your bank statements. If you're reconciling multiple accounts or entities, make sure you're matching the right GL account to the right bank account. Mixing up accounts at this stage means you'll spend hours investigating "discrepancies" that are just data pulled from the wrong place.

What to do:

• Export GL cash account balances for the exact period covered by your bank statements (same start and end dates)
• Verify you're pulling from the correct GL account for each bank account being reconciled
• Include all cash-related accounts – checking, savings, petty cash, payment processor clearing accounts
• Confirm the GL data includes all posted transactions and excludes any pending or draft entries
• If reconciling multiple entities or subsidiaries, pull GL data separately for each to avoid cross-entity confusion

3. Match transactions

Comparing every line in your bank statement to every line in your GL and marking matches is excessively time-consuming. In a manual process, you're scrolling through spreadsheets, looking for matching amounts and dates, then checking them off one by one. Even with strong attention to detail, it's easy to miss matches when transaction descriptions differ between your bank and your GL, or when one payment in your GL shows up as multiple withdrawals on your bank statement.

Automation changes this step from hours to minutes. Reconciliation software can match transactions based on amount, date and custom rules you define (like matching payment batches to individual invoices). The system flags unmatched items so you can focus your attention on discrepancies instead of manually verifying hundreds of matches.

What to do:

• Compare each bank statement transaction to GL entries, matching by date, amount and description
• Mark matched transactions so you don't review them multiple times
• Use reconciliation software to auto-match transactions based on rules (exact amount, date within range, reference numbers)
• Group related transactions – if one GL entry represents a batch payment that shows as multiple bank transactions, match them together
• Flag unmatched items for further investigation rather than forcing incorrect matches
  

4. Identify timing differences

Not every unmatched transaction is an error. Timing differences are normal – checks you issued but the recipient hasn't cashed yet, deposits you recorded but the bank hasn't processed, electronic payments in transit. These items will reconcile themselves once they clear, but you still need to account for them during the current reconciliation period.

The challenge is distinguishing legitimate timing differences from actual errors. An outstanding check from last week is normal. An outstanding check from six months ago might mean it was lost, voided or never received. You need to track timing differences so they don't become permanent reconciliation adjustments cluttering future periods.

What to do:

• Identify outstanding checks, including the amounts your GL shows as paid but haven't cleared the bank yet
• Track deposits in transit, documenting amounts recorded in your GL that haven't appeared on your bank statement
• List electronic payments pending, including ACH, wire transfers or credit card payments that haven't processed
• Age outstanding items, and flag checks or deposits that have been outstanding for more than 30-60 days
• Maintain a running list of timing differences to verify they clear in the next reconciliation period

5. Investigate discrepancies

After you've matched transactions and identified timing differences, what's left are true discrepancies. These are items that don't match and aren't explained by timing, and they require investigation. Discrepancies left unresolved corrupt your financial records and cascade into future periods.

Prioritize investigating large discrepancies first and those that affect cash availability. A $5 bank fee you forgot to record is less urgent than a $50,000 deposit that's in your bank account but missing from your GL. Document what you find during investigations, since auditors will want to see how discrepancies were identified and resolved.

What to do:

• List all unmatched items after matching transactions and identifying timing differences
• Prioritize investigating high-dollar discrepancies and items affecting cash flow decisions
• Check for common causes, such as duplicate entries, transposed amounts, wrong accounts, missed bank fees
• Review source documents, including invoices, receipts and payment confirmations to determine what actually happened
• Document findings for each discrepancy including what caused it and how it will be corrected

6. Record adjustments

Once you've investigated discrepancies, you need to correct your GL to reflect reality. This might mean recording bank fees that weren't entered, adjusting incorrectly recorded amounts, writing off voided checks or adding deposits that were received but never logged. These adjusting entries bring your GL balance in line with your actual bank balance so your financial statements reflect the truth.

Adjustments need proper documentation and approval before posting. You don't want to make GL changes without a clear audit trail showing why the adjustment was necessary and who authorized it. This becomes critical during audits and when finance leadership questions why ending cash balances changed.

What to do:

• Create journal entries for each adjustment needed (bank fees, NSF checks, interest income, errors)
• Include detailed descriptions explaining why each adjustment is necessary
• Attach supporting documentation, including bank statements, fee notices and corrected invoices
• Route adjustments through proper approval workflows before posting to the GL
• Post adjustments to the correct accounting period and verify they update cash balances correctly

7. Validate reconciled balances

After recording adjustments, your GL balance should match your bank statement balance – accounting for outstanding checks and deposits in transit. If they still don't match, you missed something in your investigation or made an error in your adjusting entries. This validation step confirms your reconciliation is actually complete before you move on.

Calculate your reconciled balance using this formula: 

Bank statement balance + deposits in transit - outstanding checks = Adjusted GL balance

 If those numbers don't tie out, trace back through your work to find the error. Don't force the reconciliation by making unexplained balancing entries – that just pushes the problem into the next period.

What to do:

• Calculate the reconciled balance: bank statement balance plus deposits in transit minus outstanding checks
• Compare the reconciled balance to your adjusted GL balance (which is your GL balance after posting adjustments)
• If balances don't match, review your work to find missed transactions, incorrect adjustments or calculation errors
• Verify all timing differences are properly accounted for and haven't been double-counted
• Confirm the math adds up before proceeding to approval

8. Review and approve reconciliation

Reconciliations need independent review before they're considered complete. The person who performed the reconciliation shouldn't be the same person who approves it – segregation of duties catches errors and prevents fraud. Reviewers should verify that all discrepancies were investigated, adjustments are properly supported and the reconciliation actually balances.

In most organizations, controllers or accounting managers review reconciliations prepared by staff accountants. The reviewer checks the math, samples a few matched transactions to confirm accuracy and ensures large adjustments have adequate documentation. Once approved, the reconciliation becomes part of the official accounting record for that period.

What to do:

• Assign reconciliation review to someone independent (not the person who performed the reconciliation)
• Reviewer verifies all discrepancies were investigated and resolved with proper documentation
• Reviewer confirms adjustments are reasonable, properly supported and posted to correct accounts
• Reviewer checks math and validates that reconciled balance ties to GL and bank statement
• Reviewer signs off on reconciliation with approval date and notes before it's finalized

9. Archive reconciliation documentation

Once your reconciliation is approved, archive all documentation, including bank statements, GL reports, investigation notes, adjusting entries and sign-off approvals. Auditors will request reconciliations from prior periods, and you need to produce them quickly without reconstructing your work from scratch. Proper archiving also protects your team when questions arise months later about why specific adjustments were made.

Store reconciliations in a consistent format and location so anyone on your team can find them. If you're using reconciliation software, it should automatically archive each period's work. If you're working in spreadsheets, establish a folder structure by period and account type so documentation doesn't get lost or overwritten.

What to do:

• Compile all reconciliation documentation – bank statements, GL reports, adjustment entries, approval sign-offs
• Save documentation in a structured format by period and account (e.g., "2026-01 – Operating Account Reconciliation")
• Store files in a centralized location accessible to finance team and auditors (shared drive, document management system)
• Set retention policies that comply with audit and regulatory requirements (typically 7 years for financial records)
• Include notes documenting unusual items or complex adjustments so future reviewers understand the context

Common challenges in managing bank reconciliation

While bank reconciliation is straightforward in concept, it can also create several challenges, each of which presents a unique risk to your business:

Timing differences

Transactions like outstanding checks or deposits in transit that haven’t cleared the bank can cause mismatches in your financial records, leading to decisions based on inaccurate cash data. This can lead to insufficient funds for critical payments or missed opportunities due to an incorrect view of available cash.

Unrecorded transactions

Missing or delayed transactions can keep you from understanding your true cash position and lead to financial penalties or overdraft fees. As unrecorded transactions pile up, it becomes even harder to track cash flow accurately, which can derail long-term planning.

Manual entry errors

Errors in manual data entry can cause a cascade of problems, from incorrect financial reports to decisions made on inaccurate figures. Over time, these errors erode trust in your financial data and can lead to compliance issues or strained relationships with your vendors and other financial stakeholders.

Multiple accounts and currencies

Managing different accounts and currencies adds complexity in bank reconciliation, especially for global businesses. Small errors in one account can snowball into broader financial discrepancies and make it difficult to get a clear view of your company’s overall financial position.

What are bank reconciliation tools​?

When you’re ready to overcome the challenges of manual account reconciliation, you’ll find the right tools and software can make a significant impact. By automating key steps in the bank reconciliation process, such as matching transactions and reconciling multiple accounts, these solutions help you save time, reduce errors and improve the accuracy of your financial records. 

Top bank reconciliation tools​ include:
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Automation tools are particularly useful if your business manages multiple subsidiaries, currencies and accounts. They simplify reconciliation tasks that would otherwise require extensive manual effort, allowing your team to focus on more strategic activities such as cash flow forecasting and financial planning.

Selecting the best tools for bank account reconciliation

Most finance teams approach bank reconciliation software selection backward – they start with demos and pricing before understanding what their reconciliation process actually requires. Six months later, they've implemented a tool that handles 70% of their needs while the other 30% still requires spreadsheets, manual workarounds and extra hours during month-end close. The bank reconciliation solution you choose should eliminate manual work, not just shift it to different tasks.

Selecting the right reconciliation tool starts with clarity about your specific requirements and evaluating which solutions deliver without forcing compromises. Here's what to assess: 

Confirm that the bank account reconciliation tools integrate natively with your ERP

A reconciliation tool that sits outside your ERP creates the exact problem it's supposed to solve – manual data movement, version control issues and disconnected workflows. You're downloading bank statements, uploading them into the reconciliation tool, then manually posting adjustments back into NetSuite or your accounting system. Every handoff introduces errors and delays that undermine the automation you paid for.

Native integration means the reconciliation tool works directly inside your ERP using the same data structures, security controls and workflows your finance team already uses. When a transaction is matched or an adjustment is posted, it updates your GL immediately without exports, imports or waiting for overnight batch syncs. If the vendor claims their integration is "seamless" but it requires middleware or custom API development, it's not native, and you'll spend months maintaining it.

What to evaluate:

• Confirm the tool is built directly into your ERP (e.g., a NetSuite SuiteApp) rather than a third-party platform that syncs data
• Test whether matched transactions and posted adjustments update your GL in real time or require manual syncing
• Verify the tool uses native ERP data structures (including your existing GL accounts, subsidiaries and currencies) instead of creating parallel records
• Ask how updates to your ERP version affect the integration – native tools update automatically while third-party integrations often break
• Check whether users need to log into multiple systems or if reconciliation happens entirely within the ERP interface

Evaluate how effectively the tool automates transaction matching

Manual transaction matching is where reconciliation time disappears – scrolling through bank statements and GL reports, hunting for matching amounts and dates, checking them off one by one. Basic reconciliation software might automate exact matches (same amount, same date), but that only handles 60-70% of your transactions. The remaining 30% – payment batches, partial payments, transactions with different descriptions between bank and GL – still require manual matching.

Advanced automation handles the complex matching scenarios that break basic tools. Can the software match one bank deposit to multiple GL invoices? Can it recognize that a $10,000 bank withdrawal is actually a batch of 15 individual payments? Can it apply custom matching rules based on reference numbers, vendor names or transaction patterns? If the tool forces you into spreadsheets for anything beyond simple one-to-one matches, it's not solving your problem.

What to evaluate:

• Test the tool's matching rules with your actual bank statements – not sanitized demo data
• Confirm it handles many-to-one matching (multiple bank transactions to one GL entry or vice versa)
• Verify it can match based on reference numbers, vendor names and custom identifiers – not just amount and date
• Check whether the tool learns from your matching patterns and suggests matches based on historical data
• Ask what percentage of your transactions will auto-match versus requiring manual review

Assess the tool’s ability to handle multiple accounts, entities, and currencies

If you're reconciling five bank accounts across three entities in two currencies, reconciliation complexity scales exponentially. 

Basic tools force you to reconcile each account separately, manually track cross-entity transactions and convert currencies using spreadsheets. By the time you've finished reconciling everything, your close timeline has stretched from days to weeks and your team is buried in manual work.

Enterprise reconciliation tools centralize multi-account, multi-entity and multi-currency reconciliation in one system. You can see every account's status at a glance, track which entities have completed reconciliation and handle foreign exchange adjustments automatically based on your ERP's currency rates. If the tool can't support your full organizational structure without workarounds, you'll outgrow it the moment you add another entity or bank account.

What to evaluate:

• Confirm the tool supports multiple subsidiaries, legal entities and intercompany accounts without requiring separate reconciliations
• Test multi-currency reconciliation, seeing if it automatically applies exchange rates from your ERP or force manual calculations
• Verify you can view reconciliation status across all accounts and entities from one dashboard rather than switching between screens
• Check whether the tool handles multiple bank accounts per entity, including operating accounts, payroll accounts and merchant accounts
• Ask how the tool manages intercompany transactions that appear in multiple entities' reconciliations

Verify support for reviews, approvals, and audit-ready documentation

Reconciliations without proper review and approval controls create audit risk and compliance gaps. If anyone can post adjustments without approval or if there's no audit trail showing who reconciled what and when, you're vulnerable during audits and internal investigations. Spreadsheet-based reconciliation makes this worse: version control breaks down, approvals happen via email chains and documentation gets lost or overwritten.

Strong reconciliation tools enforce segregation of duties by requiring independent review before reconciliations are finalized. They maintain complete audit trails showing who performed the reconciliation, who reviewed it, what adjustments were made and when approval was granted. All supporting documentation – bank statements, investigation notes, adjustment justifications – lives in one place and can be retrieved instantly when auditors request prior period reconciliations.

What to evaluate:

• Confirm the tool requires formal approval from someone other than the preparer before reconciliations are finalized
• Verify it maintains a complete audit trail showing every action taken during reconciliation (matches, adjustments, reviews, approvals)
• Check whether supporting documentation (bank statements, adjustment notes) can be attached directly to each reconciliation
• Test whether you can easily retrieve reconciliations from prior periods for audit requests
• Ask how the tool handles approval delegation when reviewers are out of office

Determine whether the tool can scale with transaction volume and close timelines

A reconciliation tool that works for 500 monthly transactions might collapse under 5,000. As your business grows, it means more customers, more vendors and more payment methods. Transaction volume increases, and so does reconciliation complexity. If your tool slows down, times out or forces you back into manual processes when volume spikes, you've invested in a solution that can't scale with your business.

Evaluate whether the tool maintains performance as transaction counts grow. Can it handle month-end volume spikes when payment processing doubles? Does it slow down when reconciling accounts with thousands of transactions? Can it support faster close timelines (5-day close instead of 15-day close) without requiring extra headcount? If the vendor can't provide examples of customers running similar transaction volumes, that's a signal their platform hasn't been tested at your scale.

What to evaluate:

• Ask the vendor about performance benchmarks, including how many transactions can the tool process before performance degrades
• Request references from customers with similar transaction volumes and close timeline requirements
• Test the tool with a high-volume month of your actual data to confirm it doesn't slow down or crash
• Verify the tool can support compressed close schedules (daily reconciliation, five-day close) without requiring process changes
• Confirm the tool's architecture can scale as you add entities, accounts and payment methods without requiring a platform upgrade

Best practices for bank reconciliation

Implementing best practices for bank reconciliation improves cash flow accuracy, bolsters the efficiency of your financial operation and reduces the risk of financial discrepancies. By adopting the right strategies and tools, you can streamline the reconciliation process even further while maintaining clear oversight of your organization’s cash flow. Below are some key best practices to help you mature your reconciliation efforts.

1. Automate bank reconciliation 

Manual reconciliation is time-consuming and prone to errors, which compound as your business grows. By automating reconciliation tasks, such as matching transactions, importing bank data and handling multiple accounts and currencies, you can reduce the risk of errors and give your team extra time for high-value activities.

2. Establish a regular schedule

Performing reconciliations regularly helps you catch errors early while keeping the process manageable. We recommend high-volume businesses reconcile more frequently – ideally daily – while low-volume businesses can opt for a weekly or monthly cadence. Communicating clear deadlines and assigning responsibility can bring added consistency and accountability to your bank reconciliation efforts.

3. Use high-quality transaction data

Accurate and timely data speeds and simplifies your bank reconciliations. To improve your data quality and avoid discrepancies, record transactions promptly in your accounting system and consider using real-time data feeds from your bank. To reduce the likelihood of errors and maintain an audit trail, double-check your data entry and keep consistent records.

4. Investigate and resolve discrepancies quickly

Discrepancies between your records and bank statements are inevitable, but when they happen your team needs to recognize and address them promptly. Prioritize significant issues and establish clear protocols for investigating and resolving discrepancies. Quick action helps you prevent small problems from escalating and improves the accuracy of your financial records.

5. Centralize financial operations

Managing multiple accounts, cardholders, subsidiaries or currencies can complicate your bank reconciliation process. By centralizing your reconciliation efforts in one system that integrates natively with your enterprise resource planning (ERP) system, you’ll have access to all the right data – all in one place – which can help you reconcile faster and more accurately than ever before. 

Simplify and streamline your bank reconciliation workflow with ZoneReconcile 

For businesses using an ERP system like NetSuite, ZoneReconcile offers a powerful solution to automate and simplify bank reconciliation. With ZoneReconcile, you can:

• Automatically match transactions: ZoneReconcile allows you to upload bank and credit card statements or set up transaction feeds directly from your financial institutions. The software then automatically matches transactions in real time, eliminating the need for manual data entry and the errors that come with it.
• Handle complex transactions effortlessly: Whether dealing with foreign currencies, payment batches, closed transactions or direct debits, ZoneReconcile makes the reconciliation of complex transactions quick and easy, even across multiple subsidiaries and accounts. It can even handle transactions such as direct debit reversals and transaction fees simply and efficiently.
• Reduce reconciliation time: By automating key reconciliation tasks, ZoneReconcile helps you complete your reconciliation processes in minutes rather than hours, freeing up your time for value-added activities like forecasting.
• Improve accuracy: Automation reduces the risk of manual data entry errors, ensuring that your financial records remain accurate and up to date, even when your transaction volumes are high.

By integrating a tool like ZoneReconcile into your reconciliation process, you can significantly reduce the time and effort it takes to maintain accurate financial records while ensuring that your finance team operates at peak efficiency.

Ready to streamline your bank reconciliation process? Book a demo today.