This bank reconciliation template enables finance and accounting teams at tech companies to:
- Cross-check bank account balances with your internal records, ensuring that you’re documenting transactions correctly, identifying their sources, and matching their settlement status with your bank account
- Identify discrepancies to perform investigations and troubleshoot issues, whether it’s by contacting the bank or adjusting errors made internally, and recoup funds when necessary
- Implement internal controls to proactively manage risk, identify fraud, stay compliant, and prepare for audits
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How to use this bank reconciliation template
Step 1: Collect the relevant data
Before beginning the reconciliation process, you first need to gather all necessary documents. This includes your company’s cash book and the latest statements from your bank.
- Download the month-end closing balance from your internal ledger.
- Then download bank statements in CSV or Excel format for the same period.
Step 2: Match transactions or entries
The next step is to compare each entry in your ledger with entries on the bank statement, using unique identifiers such as transaction IDs, dates, or amounts.
- Import your internal and bank data into the reconciliation template.
- Either manually match items or use Excel functions that identify matches and mismatches.
- Flag any transactions that do not match.
Step 3: Account for variances
You then need to consider fees, chargebacks, and refunds that might not be immediately reflected in your ledger entries and that can cause mismatches. Think: bank fees, payment processing fees, and discrepancies due to timing issues.
- Review mismatched transactions to identify if they require adjustments due to variances
- Update your records to reflect the correct numbers and ensure that they match the bank statement post-adjustment
Step 4: Investigate discrepancies
Any transactions that cannot be matched after accounting for variances should be thoroughly investigated. Common reasons for discrepancies include manual entry errors, unauthorized transactions, or delayed deposits.
- For each unmatched transaction, investigate the cause by tracing back to the original transaction document or receipt.
- Contact the bank or payment provider if discrepancies cannot be internally resolved.
Step 5. Document the reconciliation process
Maintain a comprehensive log of the reconciliation process to ensure accountability and traceability. That includes recording the date of reconciliation, names of individuals involved, significant findings, and a record of the communication with third parties.
- Create a reconciliation report summarizing the actions taken, discrepancies found, and resolutions achieved.
- Ensure that all steps and resolutions are approved by a manager
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Benefits of this bank reconciliation template
Stay updated on the cash status of your bank account
This template helps you monitor your cash position, ensuring you always know what’s in the bank. Performing reconciliation regularly allows for better cash flow management and strategic decision-making.
Close the month more efficiently, more quickly, and with less stress
By using this template, you can begin to implement an organized approach and set of procedures to streamline the month-end close process.
Improve the accuracy of your financial reporting
With accurate matching and record-keeping, the template enhances the reliability of your financial data. This accuracy is crucial for internal assessments and for maintaining stakeholder trust in your financial statements.
Proactively prepare for audits by keeping detailed records of your bank transactions
This template facilitates comprehensive documentation of all bank transactions, which is invaluable during audits. Well-maintained records expedite the audit process and reduce the likelihood of compliance issues.
Give visibility to key stakeholders on the different inflows and outflows of cash
Clear insights into cash movements help stakeholders understand financial health and liquidity. This visibility supports informed decision-making across the company.
Implement internal controls and work toward SOX compliance
The template helps you establish internal controls by standardizing reconciliation processes. This standardization is essential for SOX compliance, particularly in ensuring the accuracy of reported financial data.
Identify fraud and reduce losses
Regularly performing reconciliation enables the early detection of irregularities and potential fraud. By identifying and addressing these risks promptly, the template helps minimize financial losses and safeguard company assets.
FAQs about this bank reconciliation template
How frequently should I use this bank reconciliation template?
Performing reconciliation regularly is important. Whether you do it every day, week, or month, keeping a consistent schedule helps you identify errors early, which allows you to quickly investigate and identify the root cause before the problem gets worse or it’s too late to recoup the funds.
Performing bank reconciliation regularly also gives decision-makers in your organization the financial information they need to make informed decisions.
What types of discrepancies are most common in bank reconciliations, and how can they be addressed?
Common bank reconciliation discrepancies include transaction timing differences, bank or PSP fees, unrecorded interest charges, and human error.
To account for these errors, make sure that each transaction is timestamped correctly, review and record all bank-imposed charges regularly, and implement a double-check system where a second finance professional verifies and approves entries.
How do I obtain additional data on unrecognized bank transactions?
Start by examining the available details from your bank statement, such as the date, amount, and transaction description. Sometimes, the description might include identifiers like a transaction ID, vendor name, or location that can provide clues.
Compare the unrecognized transaction against purchase orders, receipts, invoices, and payment authorizations within your organization. This might help identify if the transaction was internally documented but mislabeled or misplaced.
If the transaction remains unidentified after an internal review, contact your bank directly. Banks can provide more detailed information, such as the merchant’s contact information or the exact nature of the transaction (e.g., point-of-sale payment, online transaction).
Ask your colleagues and members of other departments if they recognize the transaction. This is particularly useful for transactions that might pertain to specific operational areas like procurement or sales departments.
If your company uses electronic payment systems or third-party payment processors, check these platforms as they often have detailed logs of every transaction, which might not be fully detailed on your bank statement.
Finally, keep a log of your investigation process and findings for each unrecognized transaction. This documentation can be vital for audits, financial reporting, and improving your transaction monitoring processes.
What should I do if I find a persistent mismatch or suspected fraud during reconciliation?
When encountering persistent mismatches or suspected fraud during reconciliation, it is crucial to act swiftly and methodically to resolve the issues and mitigate any potential damage.
Begin by thoroughly documenting the mismatch, including the date it was identified, the transactions involved, and any previous attempts to reconcile. This record will be essential for tracking the issue and for any potential audit trails.
Then report the issue to higher management immediately. Timely communication ensures that senior leaders are aware of potential risks and can support swift resolution strategies.
Conduct a detailed investigation to determine the root cause of the mismatch. Review related transactions, check for entry errors, and assess whether the mismatch could be due to timing issues. For suspected fraud, scrutinize the transactions for any signatures of unauthorized activity. Contact your bank or financial institutions to verify transaction details. Banks can provide additional information or clarification that might not be visible through regular channels.
Depending on the findings, corrective actions might include adjusting journal entries, updating financial controls, or revising procedures to prevent future discrepancies.
After addressing the immediate issue, review your internal controls to prevent similar occurrences. Strengthening these controls might involve enhancing transaction monitoring, improving segregation of duties, or updating security measures.
Finally, training and awareness are essential: Educate your team about the types of fraud and errors that can occur and how to detect them. Regular training ensures that your staff remains vigilant and informed about best practices in fraud prevention.
How can I handle large volumes of transactions efficiently during reconciliation?
You can achieve a degree of automation with this Excel template by leveraging pivot tables or queries for summarizing data and macros for repetitive tasks to improve efficiency. You can also implement batch processing to handle transactions in groups rather than individually, which can significantly speed up the reconciliation process for large volumes.
But once transaction volumes exceed a certain threshold and you begin to work with multiple banks and payment processors, performing bank reconciliation in Excel takes longer, usually requires additional resources, and is more vulnerable to human error. For finance teams beginning to operate at scale, it’s time to consider automated reconciliation software.
Get this free bank reconciliation template
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Limitations of this bank reconciliation template
This bank reconciliation template supports finance teams that manage their operations manually in Excel, which can suffice when transaction volumes are relatively low and you’re only working with one or two PSPs.
But when transaction volumes increase and your business begins working with multiple banks and payment processors, managing bank reconciliation in Excel can begin to pose serious risks to your business. Here’s what manual bank reconciliation doesn’t do for you:
- It doesn’t provide you with real-time monitoring and alerts when issues occur
- It doesn’t provide real-time insights into bank fees, chargeback ratios, and unsettled funds
- It still requires your team to manually download and aggregate data
- The only level of automation it supports is through VLOOKUPS and Excel scripts
- It cannot support very high volumes before it begins to slow down and break.
Remember: Excel is amazing, but it’s not a database management system.
For finance teams that have reached the limits of Excel, there’s a new generation of automated reconciliation software that is built specifically for finance teams that they can configure, implement, and operate on their own.
