Four steps to reconcile your bank
The previous lesson reconciled the supplier statement before money left the business. One question then closes the cash cycle: does the bank agree with your books? Most owners read the banking app balance and treat it as the truth. It is partial: it holds items you have not recorded, and misses items you recorded that never reached the bank. Here are four monthly steps, run from WhatsApp.
Why the bank balance is never your book balance
A gap between the two is normal in any working business. A cheque handed to a supplier leaves your books before it leaves the bank. A transfer landing on Thursday evening shows at the bank before your accountant posts it. Those are timing gaps and they close themselves. The dangerous kind is different: a debit you cannot trace, a transfer that went out twice, an amount the bank posted by mistake. Those never close, and the longer they sit the harder to prove.
Step 1: fix the start and end points
Take a statement covering a full calendar month, not an arbitrary date range. Compare its opening balance with the balance you approved in last month's reconciliation. If they differ, the gap is old and starting anyway means chasing a number you will never find. Close it first, or park it as a named open item with its date.
Step 2: classify every difference before you fix it
Sort the differences first, because each type has its own action:
| Type of difference | How you recognise it | Action |
|---|---|---|
| In your books, not at the bank | An uncashed cheque, a last-day transfer | Record as in transit and track its age |
| At the bank, not in your books | Fees, commission, a direct deposit | Post it with its document right away |
| Source unknown | A debit or credit with no support | Query the bank, quoting date and reference |
The rule: what you understand gets posted, what you do not gets queried now. Match large movements first; they close most of the gap in minutes.
Step 3: watch the age of open items
An in-transit item is acceptable for a month, questionable after two, a problem after three. A cheque still uncashed after ninety days was either lost or never reached the payee, and either way the money is locked out of your liquidity. Give your sheet one column called age in days, and review anything past sixty days with the person concerned. Connect your books to your account activity so both sit on one screen, and see Arabic accounting from your phone.
Step 4: approve the sheet and file it
A reconciliation ends with a sheet, not a feeling: start at the bank balance, add what has not reached the bank, subtract what you have not recorded, and land on your book balance. If it does not close, never force it with an unexplained adjusting entry: leave the difference visible and named until its cause is known. File the sheet with the statement and the month's documents: statements support your entries, and keeping accounting records is a legal requirement under the regulations of the Zakat, Tax and Customs Authority, covered in the compliance track's record-keeping lesson.
Running it from WhatsApp
A service centre owner receives her statement at month end and forwards it instead of opening a file:
Owner: Here is this month's bank statement, reconcile it against our books
System: Opening balance matches. Four differences: two cheques handed over but not cashed, an unrecorded transfer commission, and a deposit with an unclear name.
Owner: Post the commission and show me the age of the two cheques
System: Commission posted. The first cheque is 18 days old, the second 74. Shall I chase the payee on the old cheque and query the deposit?
Ten minutes surfaced a cheque outstanding for over two months and a commission that would have become an unexplained year-end gap. Read more about running operations from WhatsApp.
Monthly bank reconciliation checklist
- Does the statement cover a full month, opening where last month's reconciliation ended?
- Is every difference classified as in transit, unrecorded, or unknown?
- Are fees and commissions posted with their documents?
- Is the age of each open item known, and anything past sixty days reviewed?
- Is the sheet free of any unexplained adjusting entry?
- Is it filed with the statement and the month's documents?