Finishing a bank reconciliation with explained items
When a client's bank reconciliation is truly complete, what to do with leftover lines, and why customer receipts must also be recorded in receivables.
By Achekam · · 5 min read · For Accountants & audit firms in South Africa, Nigeria, Kenya
Every bookkeeper has inherited a reconciliation with a line at the bottom called "difference to be investigated" that has been there for two years. Each month someone rolled it forward, the balance agreed "except for the known difference", and the month was called done. By the time anyone looks, the bank statements that would explain it are hard to find and the person who knew is gone.
A reconciliation is finished when there is nothing left on it that someone cannot explain. That sounds obvious, and Achekam enforces it, but the way it does so leaves the firm with some decisions about leftover lines and one trap around customer receipts. This article works through them for a firm keeping a client's books.
No difference, or every line explained
In Achekam, a bank reconciliation completes only in one of two states: the difference between the books and the statement is nil, or every leftover line has been explained. There is no third state in which the reconciliation is marked complete with an unexplained balance.
That rule is only as good as the explanations. Compare two:
- "Timing difference."
- "Cheque to the landlord for the month's rent, issued on the last day of the month, presented on the third day of the next month; cleared on the following statement."
The second explanation can be checked and will clear itself. The first is a label. Set a firm standard for what an explanation must say: what the item is, why it is on the reconciliation, and when or how it will clear.
For anyone new to the mechanics, AccountingTools walks through the bank reconciliation process, comparing the company's cash records with the bank statement and adjusting the books.
Lines not yet in the books
Bank lines are matched to the books by suggestion, and a person accepts each match. A bank line with nothing in the books to match, such as a bank charge, a debit order nobody captured or interest received, becomes a suggested journal that a person approves.
Those suggested journals are only candidates. In Achekam, journals proposed from documents, bank lines or adjustments wait until a person approves and posts them, and AI is refused both steps. Low-confidence fields and possible duplicates wait in the Intake Review Queue for a person to decide. For the firm, this means the reconciliation cannot be finished by accepting everything the system proposed in bulk; somebody has to look at what each line is.
Use judgement about which unmatched lines belong in the books now and which are genuine reconciling items. A bank charge belongs in the books. A deposit the client made late on the last day that the bank processed the next day is a reconciling item, not a journal.
Customer receipts: the bank match and receivables
Here is the trap. Matching a bank receipt to a customer invoice does not, today, record the payment against that invoice. The receipt also has to be recorded in receivables.
Until both are done, the invoice still looks unpaid in the customer's account, and the consequences go beyond a wrong ageing report. Credit control in Achekam is on for new workspaces, and once a day it e-mails overdue reminders and a monthly statement to customers with a balance. A customer who paid, whose payment was matched at the bank but never recorded in receivables, can receive a reminder for an invoice they have settled.
Recording the receipt properly in receivables is flexible. A payment can be recorded against one invoice or spread across several of the customer's invoices; a part payment leaves the invoice part-paid; any extra is held on the customer's account. A receipt can be re-allocated later, and administrators can refund or reverse it. Make "receipt recorded in receivables" part of the same task as "bank line matched", done by the same person at the same sitting.
Old reconciling items
Reconciling items should clear within a month or two. Any item older than that needs a reason it has not, and a decision:
| Item | Typical cause | Decision |
|---|---|---|
| Uncleared cheque or payment | Supplier never presented it; lost; stopped | Confirm with the supplier; reverse and reissue, or write back with approval |
| Unidentified deposit | Customer paid without a reference | Trace through the bank's deposit detail; ask the client; allocate or hold as unallocated |
| Bank error | Duplicate charge or wrong debit | Raise with the bank in writing; keep it on the reconciliation until corrected |
| Book error | Wrong amount or account captured | Correct by journal, with the reason |
Keep the evidence for each decision. An auditor or reviewer who sees an old item written back will ask who approved it and why.
Closing the month
The reconciliation feeds the month-end close. Before a month is closed in Achekam, the screen checks that the ledger balances and that no posting suggestions, unposted bills or unmatched bank lines are waiting. Months can be soft-closed, hard-closed and locked; a closed month refuses postings from every source, and reopening a hard close needs a second approver.
So the order is fixed: finish the reconciliation, deal with every suggested journal, record the receipts in receivables, then close. The close itself is covered in closing a client's month, and getting statements in when the client sends scans or phone photos is covered in reading scanned and photographed bank statements.
A worked example
At month end, a retailer's reconciliation shows a bank charge, a card-machine settlement the bank paid the day after month end, and a customer payment for two invoices. The bookkeeper approves the suggested journal for the bank charge, explains the settlement as a reconciling item that will clear on the next statement, matches the customer payment at the bank and then records the receipt in receivables across both invoices. The reconciliation completes with one explained line. The month closes cleanly, and the customer is not sent a reminder.
One rule to adopt
Do not let anyone mark a reconciliation complete with an explanation they could not defend to the client's auditor. If an item cannot be explained this month, it is a question for the client this month, not a line to roll forward.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
