Bank reconciliation is any time you compare documents from a bank with documents from an account holder. Businesses and individuals will sometimes take part in bank reconciliation.
If you balance your checkbook you can compare your own record keeping to the bank’s statements on your checking account and make sure they match up. This is bank reconciliation. You should make sure you have every check you’ve written accounted for and make sure the amounts match up with the bank’s numbers. You can sometimes catch bank errors that may have slipped by. Just last week I discovered my bank mistakenly took out $200 more than a check I had written. If I didn’t check my bank statements I wouldn’t have found this error and would have been out $200.
You should also keep track of ATM withdrawals and debit card purchases. If you don’t keep track of these types of transactions your checkbook register numbers won’t match up with the bank’s numbers.
Automatic bill payments are also something you may forget to keep track of that you’ll need to. When you keep track of all your finances, you won’t have any surprises when your monthly bank statement comes.
The last thing you need to keep track of is deposits and withdrawals. If you keep track of all these things you should have an easy time with a bank reconciliation.
If you find a small discrepancy between your records and the bank’s records you shouldn’t worry too much about it. Even when you’re on top of your finances it’s easy to forget a single transaction or two. Just keep in mind that banks do occasionally make errors and if there’s a large discrepancy it’s worth checking into. If you can’t figure out the discrepancy on your own then you should contact your bank for a full bank reconciliation and hopefully the issue will get resolved.