Monthly Bank Reconciliation Template

Reconcile every account, including payroll and merchant accounts, as soon as each statement arrives. The IRS advises small businesses to reconcile their checking accounts each month¹. New York's State Comptroller is stricter: state agencies must reconcile within 5 to 7 days of each month-end².

Speed also matters legally. Under the Uniform Commercial Code (UCC), in the version most states use, you must examine your statement with reasonable promptness³ and report forged or altered checks.

Miss a forged check, and later ones by the same forger can become your loss once you've had a reasonable time to review, 30 days at most. A year after the statement is made available, you can't make the bank cover an unreported forgery or alteration, no matter who was careless.

FinCEN, the Treasury's financial crimes bureau, studied six months of reports on checks stolen from the mail. Its 2024 analysis found 44% had been altered and then deposited⁴. So open the images of cleared checks and compare the payee as well as the amount.

1. 1

   Collect three things

   The bank statement with images of cleared checks, your ledger's cash detail for the same dates, and last month's reconciliation.

2. 2

   Check the starting point

   The statement should open at last month's closing balance and the ledger at last month's adjusted balance. If the ledger doesn't, last month's entries weren't posted or someone changed a closed month.

3. 3

   Tick off deposits

   Match each deposit on the statement to your records by date and amount, starting with last month's deposits in transit.

4. 4

   Tick off checks and payments

   Match cleared checks by number, amount and payee, then electronic payments, starting with last month's outstanding checks.

5. 5

   List what's left

   Items only in your records are usually timing items. Most items only on the statement go on the book side; bank errors are the exception.

Match against the ledger's line-by-line detail, not just its ending balance, because a balance can agree while the lines inside it are wrong. If your bank only gives you PDFs, a bank statement PDF converter turns them into rows you can sort and match.

OpenStax, Rice University's free textbook publisher, lays the reconciliation out with adjustments to both the bank balance and the book balance⁵. Each difference goes on exactly one side.

One question decides which: will it clear without an entry in your books? If yes, and you can say when, it's a bank-side item. Everything else goes on the book side, including anything you can't identify.

Only book-side items change your ledger. The IRS's walkthrough tells you to update your books for anything you missed or recorded incorrectly¹, such as service charges. Date each entry in the month you're reconciling.

A bank fee debits bank charges and credits cash. Interest debits cash and credits interest income. A returned customer check debits accounts receivable and credits cash, because the customer owes you again.

Watch for repeats. If the same fee turns up every month, set up a recurring entry or a bank rule in your accounting software.

Date every open item from the day you issued or deposited it, not the day you noticed it. A deposit in transit should post within days. If it isn't on the next statement, the money may never have reached the bank.

Don't void a check just because it's old. Under the UCC, a bank doesn't have to pay a check presented more than six months after its date⁶. But it may still pay one in good faith and charge your account, so a check voided in your books can clear and leave them overstating cash.

Recording an old check as income is the bigger mistake. You still owe the payee, and if the check is never cashed, state unclaimed property laws eventually make you report it and turn the money over. In Delaware, for example, most uncashed vendor and payroll checks are presumed abandoned five years after they become payable⁷. That leaves four proper ways to close it out.

• Reissue it, after a stop payment, if the payee is still owed and reachable.
• Reverse it to the original account if the payment itself was a mistake.
• Hold it and keep contacting the payee, with a named owner and a next date.
• Report it to the state once the waiting period ends.

The person who handles the money shouldn't reconcile it. New York's comptroller tells state agencies that whoever approves transactions or handles cash receipts should not perform the reconciliation². It also wants a supervisor who took no part to review and sign each one. In a small business, that reviewer is often the owner.

Reviewers should start where judgment was used: the book-side entries and anything carried over from earlier months. Check the totals last, because a reconciliation with a plug always totals.

Reconciling the bank is one step in your month-end close checklist. Once cash ties out, use the balance sheet reconciliation template for every other account. To skip the matching by hand, open this template in River, which reconciles your statements and dates every open item for you.