Bank reconciliations: Pro tips for avoiding common pitfalls

By Victoria Holthaus, CPA

We know that bank reconciliations can be the most challenging part of the month-end close. There’s a notion that this task should be easy, and for some organizations it is. But for many organizations, especially those that have complicated software integrations and e-commerce platforms, bank reconciliations can be time consuming and tricky.

To help you get to the bottom of a hard-to-reconcile account as quickly as possible, my team members and I sat down and brainstormed common pitfalls when reconciling accounts. The result: a list of things to look for and questions to ask the next time you run into a challenging bank reconciliation.

We hope that by referencing these tips, you can not only avoid bank reconciliation-related headaches but can also keep your organization on track for audit success.

Bank account not reconciling? Here’s what to look for

“Keep an eye out for voided checks and new debt that hasn’t been recorded.  Also, be sure any interest and market value adjustments are properly recorded from the prior month.” — Julie M.

“Take a look at your payroll journal (Banyon): Has it been sent over to fund accounting? — Ashley F.

“Is the reconciliation of your general ledger off, or is it the tie out of deposits and payments to the credits and debits on your bank statement that is incorrect? Determining where the error lies will help you know where to start your investigation.” — Jessi S.

“Double-check for typos in journal entries. For example, ‘1234’ instead of ‘1324.’” — Amanda W.

“Look for missed journal entries, such as an auto-pay/debit or deposit to record. And don’t forget interest and bank fees.” — Cheryl K.

“Verify that the checks that cleared the bank match the total value of what you have cleared in the general ledger.” — Annette S.

“Make sure that everything is updated to the general ledger (Civic) or files pushed from utility billing or payroll (Banyon). Ensure all miscellaneous items such as interest and bank fees are recorded. Then, start breaking the account into sections (e.g., checks, withdrawals, deposits) to find the culprit.” — Tessa B.

“Are your journal entries made to cash?” — Karri T.

“Be sure to look for items that are posted to the wrong month.” — Jean M.

“Confirm that refunds from utility billing are recorded as negative receipts. And that all checks are posted from the month and not just sitting in the check writer.” — Izzy W.

“Verify both our ending bank statement and book balance from the prior month matches the beginning balances for the new month. You could possibly have a voided transaction from the prior month throwing it off.” — Amanda W.

“If you’re using a spreadsheet, check formulas for accuracy.” — Cheryl K.

“If your beginning balances don’t tie to prior months (i.e., the entries are back dated), try tying out monthly activity to see if the difference is due to prior months or the current month.” — Natalie D.

“If you’re using Banyon, ensure that any posted electronic payments are assigned a check number. Otherwise, they won’t show up on the bank reconciliation screen.” — Izzy W.

“Closely review all journal entries hitting cash. Review non-sufficient funds checks for proper recording as well.” — Kelli T.

“Look for reconciling items that were cleared but not removed from the reconciliation spreadsheet. Also look for voided checks that were recorded but not removed from the outstanding check list.” — Jodi B.

“Are all batches posted? Did a batch get posted twice? Were all reversals/voids properly completed? Are all EFT/ACH items accounted for? Did something get posted to a prior month after it was already reconciled? Do you have the proper beginning and ending balances? Did a transaction get coded directly to cash?” — Amber C.

“Verify the outstanding check list rolls forward appropriately to what was recorded to cash in the system and cleared the bank. Also verify that in-transit items are accounted for appropriately. For example, did the prior month’s in-transit items clear in the current month? Are there any in-transit items that need to be split (i.e., part of the item clears in current month, the other part clears in the next month)?” — Maari B.

“Sometimes the bank statement will have the wrong amount listed for the cashed check, so the ending balance is off from what it should be. This is pretty rare, but I have seen it happen.” — Debi S.

Bring clarity to your bank reconciliations

Bank reconciliations are critical to a successful month-end close—and they can also be a roadblock to achieving one. We hope this list of tips brings clarity to your bank reconciliations, so you can keep your organization on track.

Best practice is to have reconciliations complete within 60 days of month-end. If you are struggling to finalize your reconciliations for 3 or more months, consider a second set of eyes to help your organization get back on track.

If you have questions about anything on this list or are struggling to reconcile your organization’s accounts, our team is here for you. We can help you streamline your month-end close processes and, if needed, identify the cause of inaccuracies in your accounts.

To learn more about how we can support your organization, contact us today.

We also invite you to Cleared for Takeoff: A High-Flying Guide to Investing and Process Innovation, where Abdo and Moreton Capital Markets will navigate you through fixed income securities and the investment reconciliation process, all with an action-packed Top Gun: Maverick theme. This engaging session is designed to equip you with essential knowledge and practical skills. Click here to find a session near you and RSVP to secure your spot in the cockpit!