How to Reconcile a Business Bank Account Each Month

By Cedar & Ledger

Reconciling means checking that your own record of business money matches what the bank says, and explaining every difference. Once a month, after the statement comes out, is enough for most small businesses and side hustles. It takes about 20 minutes and catches missed entries, typos, surprise fees and double charges while they're still easy to fix.

Every balance and transaction below is a made-up example to show the steps, not a real account. This is general information, not tax, legal, accounting or financial advice.

Quick checklist

• ☐ Download the month's bank statement (or the transaction list for the month)
• ☐ Find your record's ending balance for the same last day
• ☐ Tick off every transaction that appears in both
• ☐ List what's in your record but not on the statement yet
• ☐ List what's on the statement but not in your record
• ☐ Adjust both balances and check that they match
• ☐ Fix your record, note the date, and save the statement

Step 1: Pick the same end date

Use the statement's closing date, for example the last day of the month. Your record (a spreadsheet, a notebook, an app) needs its balance on that same day. If your record starts mid-year, use the bank balance on your start date as your opening balance so the two begin in the same place.

Step 2: Tick off what matches

Go down the statement line by line. For each deposit or payment, find the same amount in your record and mark both. Most lines will match. What's left over is what you need to explain.

Step 3: Sort the leftovers into four kinds

1. Deposits in transit: money you recorded that the bank hasn't posted yet, like a check deposited on the last day.
2. Outstanding payments: checks or payments you recorded that haven't cleared yet.
3. Bank-only items: fees, interest or automatic charges the bank posted that you never wrote down. Card payouts that arrive with fees already taken out are a common one (how to record cash and card sales).
4. Mistakes: a typo, a missed entry, or something entered twice, in your record or (less often) at the bank.

Step 4: Do the math

Example (made-up numbers):

Both sides land on $5,115.60, so this example month is reconciled. Add the fee and the interest to your record, and leave the deposit and the check alone, since they should show up on next month's statement.

Step 5: If it still doesn't match

• Check the difference amount. If it's exactly one transaction, look for that amount on one side only.
• If the difference divides evenly by 9, look for two swapped digits. In the example, typing $68.50 for an $86.50 purchase leaves an $18.00 gap, and 18 divides by 9.
• If the difference is twice an amount, you may have entered a payment as a deposit, or the other way around.
• Look for duplicates, like a receipt logged twice or a charge the bank posted twice.
• Check last month's leftovers. A deposit in transit from last month should clear early this month. If it never shows up, follow up.

If the bank made the mistake, like a double charge, contact them with the date and amount.

Step 6: Write it down and move on

Note "Reconciled through Sept 30" (or whatever date) at the top of your record and save the statement where you keep receipts. Next month you only have to look at what's new. If you already do a weekly check, like the one in Weekly Bookkeeping Routine for a Small Business (20 Minutes), the monthly reconcile goes faster because most entries are already right.

December's reconciliation is part of closing the year; Small Business Year-End Bookkeeping Checklist lists the rest.

Common snags

• Mixing personal spending into the business account. It makes every month harder. Separate Business and Personal Money for a Side Hustle covers a simple setup.
• Using different end dates for the bank and your record.
• Forcing it to match with a made-up "adjustment" line instead of finding the real difference.
• Skipping months. Three months at once is much harder than one.
• Forgetting small automatic charges, like bank fees or payment-app fees.

A spreadsheet for the record side

You can keep your record in any spreadsheet. If you'd like one ready-made, the Small Business Bookkeeping Spreadsheet ($12, Excel and Google Sheets) has a transactions tab with room for 1,500 entries and category dropdowns, and fills in a monthly and yearly profit and loss from those rows, with a warning if any row is missing a category. It doesn't connect to your bank and doesn't reconcile for you: you type in transactions yourself and compare its totals to your statement using the steps above. It tracks one business and one year per file, and it's a record-keeping tool, not accounting software or tax advice (details).

Honest note: I make this spreadsheet and sell it under Cedar & Ledger, so I'd earn from a purchase. General information only, not tax, legal, accounting or financial advice.

Related template: read about the small business bookkeeping template

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