What is a bank reconciliation statement and why should I prepare one?

A bank reconciliation statement matches the bank balance in your books with the balance in your bank statement and explains each difference.

Common reasons for differences are cheques issued but not yet cleared, deposits not yet credited, and bank charges, interest or direct debits that you have not yet recorded in your books. Preparing this statement regularly helps you identify and record these unrecorded items and track timing differences, ensuring your cash balance is accurate.

Doing this regularly, for example monthly, helps catch missed entries, duplicate payments and errors early.