What Should You Do If You Cannot Reconcile Your Account?

Bank reconciliation is an accounting process that compares internal financial records, such as a checkbook or accounting software, with external statements provided by financial institutions, like bank or credit card statements. This process maintains accurate financial records and ensures financial health. It confirms that all transactions are properly accounted for, reflecting the true cash position. Discrepancies are common.

Identifying Common Discrepancy Sources

Discrepancies in account reconciliation arise from various common sources, often leading to mismatches between internal records and external statements. Understanding these reasons helps troubleshooting.

Timing differences are a frequent cause of discrepancies. These occur when a transaction has been recorded in one set of records but has not yet appeared on the other. For instance, checks written and recorded in an internal ledger may not have cleared the bank by the statement date, or recent deposits made may not yet be reflected on the bank statement. This lag between recording and processing creates a temporary variance.

Data entry errors represent another common source of reconciliation issues. Human errors can include transposing numbers, such as recording $54 instead of $45, entering an incorrect amount entirely, or miscategorizing a transaction. These small mistakes can significantly impact balances and lead to an unreconciled amount.

Missing transactions also contribute to discrepancies. This happens when a transaction is simply not recorded in the internal ledger. Duplicate entries can occur when a transaction is accidentally recorded twice in the internal ledger, artificially inflating or deflating balances.

Errors made by the financial institution can also cause reconciliation problems. These bank errors might involve incorrect debits or credits, or processing errors that affect the account balance. Forgotten transactions, often small and easily overlooked, represent another common issue. These can include bank service fees, interest earned, or automatic withdrawals and deposits that are not manually tracked in the internal records.

Systematic Troubleshooting Process

A systematic troubleshooting process helps locate errors. The process begins by verifying the accuracy of starting and ending balances.

Confirm that the beginning balance in your internal records matches the ending balance from the previous reconciliation period. Simultaneously, ensure the bank statement’s starting balance for the current period is correct. If the beginning balances do not align, the discrepancy likely originates from a prior period, requiring investigation into past reconciliations.

Next, check for outstanding transactions. Compare your internal ledger’s recorded but uncleared transactions against the bank statement. This step helps identify timing differences, such as checks issued but not yet cashed, or deposits made but not yet processed by the bank. Any items listed in your records but not on the statement should be noted as outstanding.

Compare cleared transactions. Tick off or mark each transaction that appears on both your internal ledger and the bank statement. This side-by-side comparison helps confirm matching entries. As you proceed, look for unmarked transactions on either side. Identify any transactions on the bank statement that are not in your ledger, and vice-versa, as these represent potential missing entries.

Scrutinize transaction amounts for common data entry errors. Look for discrepancies that are multiples of 9, which often indicate transposed numbers (e.g., $54 entered as $45, a difference of $9). Differences that are multiples of 10 might suggest a decimal point error. Comparing the exact amounts of similar transactions can also reveal these types of errors.

Review small discrepancies, as these are often caused by easily overlooked items. Common examples include bank fees, interest earned, or minor adjustments made by the bank that may not have been recorded in your internal system. These amounts, though small, can prevent a perfect reconciliation.

If a specific difference remains, work backward from that amount. Look for a single transaction or a combination of transactions that equals the exact difference. Alternatively, if the difference is evenly divisible by two, it might indicate a duplicate entry or a transaction recorded on the wrong side of the ledger for that amount. For larger, complex accounts, breaking down the reconciliation into weekly or bi-weekly periods can help isolate the error to a shorter timeframe, making it easier to identify.

Resolving Identified Discrepancies

Once discrepancies are identified, take corrective actions. The resolution process depends on the nature of the identified error. Prompt and accurate resolution ensures the integrity of financial records.

For errors found within internal records, such as missing transactions, incorrect amounts, or duplicate entries, adjustments must be made directly in your ledger. This involves creating correcting entries to reflect the true financial position. It is important to clearly document these adjustments, noting the reason for the change and the original discrepancy found.

When a bank error is identified, contact your financial institution immediately. Provide them with specific details, including transaction dates, amounts, and your account number. Banks investigate electronic funds transfer (EFT) errors, typically within 10 business days, though some cases may take up to 45 days. It is advisable to provide written notice, even if you initially call, and keep copies of all correspondence.

In scenarios where a small, persistent discrepancy cannot be found after thorough investigation, a “reconciliation adjustment” entry may be considered as a last resort. This adjustment forces the internal balance to match the bank statement. Such adjustments should be for immaterial amounts and clearly documented as reconciliation discrepancies, indicating that the exact cause could not be pinpointed. This practice should be used sparingly, as it masks an underlying error.

After all identified discrepancies have been corrected, the final step is to formally complete the reconciliation process. This means ensuring your internal ledger perfectly matches the bank statement. In accounting software, this often involves marking the period as reconciled. For manual records, signing off on the reconciliation confirms its completion and accuracy. Regular reconciliation, ideally monthly, helps maintain financial control and accuracy.