Glossary
Bank reconciliation
Also called: reconciling · reconciliation report
A bank reconciliation proves that the cash balance in your accounting file matches the bank statement for the same date, with every difference explained.
It is the check that makes every other number trustworthy. Until the cash ties, your P&L, your balance sheet, your margin and the figures on your tax return all rest on a set of transactions nobody has confirmed is complete.
A file can look immaculate and be unreconciled. Accounting software will categorise happily, produce a confident P&L and never once mention that three days of transactions are missing or that a payment was entered twice. The reconciliation is the step that catches it, and it is the step most commonly skipped.
A forced reconciliation — posting an adjusting entry to make the difference disappear — is worse than none, because it hides a real error inside a plug figure and makes it far harder to find later.
Why it matters to a contractor
If you ask a bookkeeper for one thing every month, ask for the reconciliation report rather than the P&L. A P&L without it is a report about numbers nobody has verified.
Work it out on your numbers
See also