Bank reconciliation: What it is & how to do it (2026 guide)

Key takeaways:

• Bank reconciliation compares your business's financial records against your bank statement to catch errors, missing transactions, and fraud.

• Reconciling regularly keeps your cash flow accurate and your books audit-ready.

• Airwallex automatically syncs your transaction data with your accounting software, cutting down the manual work bank reconciliation usually takes.

Bank reconciliation is the process of comparing your business's financial records against your bank statement to make sure the numbers match.

It's one of the most basic checks in accounting, but it's also one of the easiest to skip when you're busy running a business.

This guide walks through what bank reconciliation is, why it matters, and how to do it step by step. It also covers the different types of reconciliation you'll run into, and how to handle the discrepancies that come up along the way.

What is bank reconciliation?

Bank reconciliation is the process of comparing your business's financial records with your bank statement to confirm the two match.

It flags discrepancies such as unrecorded transactions, bookkeeping errors, or fraudulent activity so you can correct them before they affect your accounts.

Understanding the adjusted balance

The goal of reconciliation is to reach what's called the adjusted balance: the true, corrected cash amount once both the bank's records and your own books account for outstanding items.

You work out two adjusted balances side by side: one starting from your bank statement, and one starting from your accounting records. When both adjusted balances match, your books are reconciled.

Common adjustments include deposits that haven't cleared yet, checks issued but not yet cashed, bank fees you haven't recorded, and interest or receivables the bank has already processed but your books haven't caught up with.

Example: Bank reconciliation statement

Here's a simplified example for ABC Company as at 31 August.

Once ABC Company accounts for these adjustments, both sides arrive at the same adjusted balance of S$5,400. That confirms the company's records are accurate and up to date.

Why bank reconciliation matters

Bank reconciliation protects your cash position, keeps you compliant, and gives you an early warning system for fraud.

Cash flow management

Reconciling regularly keeps your financial records accurate and current. Any discrepancy gets flagged and resolved quickly, giving you a clear, reliable picture of your cash flow for budgeting and planning.

Regulatory compliance

Accurate records support your auditing requirements and tax obligations. A complete, well-organised record of income and expenses is essential when you file your corporate tax return each year.

Fraud detection

Reconciliation surfaces unauthorised transactions or suspicious activity early, so you can investigate and act before the damage grows. Businesses that reconcile often (weekly or even daily) tend to catch problems faster than those that wait until month-end.

How to do bank reconciliation

Whether you reconcile manually or with accounting software, the process follows the same five steps.

Step 1: Gather your records

Pull your bank statement and your internal financial records for the same period. If your bank account is linked to your accounting software, this data imports automatically and you can skip straight to matching.

Step 2: Match transactions

Compare each transaction on your bank statement with the corresponding entry in your books. Most accounting software lets you check off matching transactions as you go, so you're only left with the ones that need a closer look.

Step 3: Investigate discrepancies

Look into any transaction that doesn't have a match. Common causes include data entry errors, outstanding checks, or bank charges you haven't recorded yet; these are covered in more detail in the next section.

Step 4: Adjust for errors

Correct your records for any discrepancy you've confirmed. This might mean adding a missing transaction, fixing an incorrect amount, or removing a duplicate entry.

Step 5: Confirm and review

Recalculate your balance and check it against your bank statement again. Once both sides match, finalise the reconciliation and save the statement for future audits.

With Airwallex, you can cut down the manual work involved in bank reconciliation. Airwallex automatically syncs transaction data with your accounting software, making it easier to match transactions and keep your books up to date.

5 types of bank reconciliation

Bank reconciliation is just one type of financial reconciliation. Depending on how your business operates, you may also need to reconcile payroll, invoices, foreign-currency accounts, and balance sheet accounts.

Here’s a quick overview:

Bank statement reconciliation

This is the standard type of reconciliation, where you compare each transaction on your bank statement against your own records to catch missing deposits, outstanding checks, or other discrepancies.

Nostro account reconciliation

A nostro account is an account your business holds at a foreign bank, denominated in that country's currency, typically used to send and receive international payments.

Reconciling a nostro account works much like reconciling a regular bank account, but with the added complexity of tracking multiple currencies and cross-border settlement timing.

Payroll reconciliation

Payroll reconciliation checks that the amount you're about to pay your employees matches what's recorded in your books. This includes reviewing hours worked, pay rates, bonuses, and deductions such as taxes and CPF contributions.

It's worth reconciling payroll every pay period, before you release payments, so errors get caught before your team gets paid rather than after.

Invoice reconciliation

Invoice reconciliation compares the invoices you receive from vendors against your purchase orders, delivery notes, and internal records to confirm they're accurate. This helps prevent overpayment and reduces disputes with vendors.

Balance sheet reconciliation

Balance sheet reconciliation checks that the balances on your balance sheet match the corresponding entries in your general ledger. You do this by reviewing supporting documents such as bank statements, invoices, and other records to identify and resolve inconsistencies.

5 common discrepancies and how to adjust for them

While doing bank reconciliation, you'll run into discrepancies between your book balance and your bank statement from time to time. Here's how to handle the most common ones.

1. Outstanding checks

These are checks you've issued and sent to a vendor that haven't been cashed or deposited yet. To adjust for them, deduct their value from your bank statement balance and keep tracking them until they clear in a later reconciliation.

2. Deposits in transit

Sometimes a deposit made after banking hours or over the weekend won't process until the next business day. Until then, add these deposits to your bank statement balance so your reconciliation reflects the full picture.

3. Bank errors

Mistakes can happen on the bank's side too, such as an incorrect fee, a wrong transaction amount, or a duplicate posting. Using an automated bank feed instead of manual data entry makes these easier to spot early.

4. Recording errors

It's also possible for mistakes to occur in your own records, including incorrect transaction amounts, missing entries, or duplicate entries. Syncing your bank feed directly with your accounting software reduces how often these errors happen in the first place.

5. Bank fees

Banks often charge fees for services such as account maintenance, overdrafts, or wire transfers, and these charges don't always show up in your records until the statement arrives.

Reviewing your fee schedule regularly helps you anticipate these charges instead of being surprised by them.

Why Singapore businesses use Airwallex for easier reconciliation

Bank reconciliation gets harder as your business grows. Instead of reconciling one local bank account each month, you may be dealing with multiple currencies, overseas payments, employee expenses, and hundreds of transactions across different accounts.

Airwallex brings these transactions into one platform and connects with your accounting software, reducing the amount of manual work your finance team needs to do. Here’s what you can do with Airwallex:

Keep multi-currency transactions in one place

If your business pays overseas suppliers or collects payments in different currencies, managing separate foreign bank accounts can make reconciliation more complicated.

Airwallex lets you hold and manage 20+ currencies in one account, giving your finance team a central view of balances and transactions.

Sync transactions with your accounting software

Airwallex connects with accounting platforms such as Xero, QuickBooks, and NetSuite, so transaction data can flow directly into your accounting system. This reduces manual data entry and makes it easier to match transactions against your accounting records.

Keep employee spending visible

Airwallex corporate cards give finance teams visibility into employee spending as transactions happen.

Instead of waiting for a monthly card statement to see what employees have spent, you can review transactions and spending activity in one place, making it easier to keep your records up to date.

Frequently asked questions (FAQs)

Is bank reconciliation part of bookkeeping?

Yes, bank reconciliation is a standard part of bookkeeping. It compares the transactions recorded in your accounting records against your bank statement to confirm your books are accurate. Most businesses treat it as a recurring bookkeeping task rather than a one-off check.

How often should you do bank reconciliation?

Most businesses reconcile monthly, in line with their bank statement cycle. If you handle a high volume of transactions or face a higher fraud risk, reconcile weekly or even daily instead. This gives you a tighter grip on your cash position. The less frequently you reconcile, the more discrepancies can pile up and the harder they become to trace.

What is the difference between bank reconciliation and financial reconciliation?

Bank reconciliation focuses specifically on matching your cash transactions against your bank statement. Financial reconciliation is broader, covering accounts receivable, accounts payable, and other financial statements beyond just your bank account. Both aim to keep your reported numbers accurate, just at different scopes.

What happens if your bank reconciliation doesn't balance?

If your adjusted balances don't match, there's an unresolved discrepancy somewhere in your records or your bank's. Go back through your outstanding checks, deposits in transit, and recorded fees to find where the mismatch occurred. Don't finalise the reconciliation until both sides agree. A small error, like a transposed digit, is often the culprit.

Is bank reconciliation the same as an audit?

No, bank reconciliation and an audit are different processes. Reconciliation is a routine internal check you perform yourself, usually monthly, while an audit is a more formal, independent review of your entire financial statements. That said, well-maintained reconciliation records make audits faster and less stressful.

Can bank reconciliation be automated?

Yes, most modern accounting software can automate large parts of bank reconciliation by importing bank feeds and suggesting transaction matches. Airwallex, for example, syncs transaction data with your accounting software so matches happen automatically instead of manually. You'll still need to review and confirm any discrepancies the software flags.