By KYN AI Advisory Team — AI implementation specialists, Singapore
Bank reconciliation is the check that your accounting records agree with your bank statement. You compare the ledger balance to the statement balance, then explain every difference as a timing item or an error. A small company should do it at least monthly, and weekly if cash is tight. It is the control that finds missing payments, duplicate entries and fraud early. Most of the matching is mechanical, so software can do the first pass while a person handles the exceptions.
What does a bank reconciliation do?
It proves that the cash number in your books is real.
Your ledger and your bank record the same events, but at different times and with different information. The bank knows about fees, interest and direct debits you may not have recorded. Your ledger knows about cheques issued and invoices raised that the bank has not yet seen. The reconciliation lists both sets of differences and shows that they fully explain the gap.
If the gap is not fully explained, something is wrong: a missing entry, a duplicate, a wrong amount or an unauthorised payment.
What are the steps?
- Get the statement. Use the statement for the same period and account as the ledger. Include card and foreign-currency accounts.
- Start from the closing balances. Note the bank statement closing balance and the ledger bank account balance on the same date.
- Match lines. For each ledger line, find the statement line with the same amount and date range. Tick both.
- List unmatched statement lines. These are items the bank has and your books do not: fees, interest, direct debits, receipts from customers not yet recorded.
- List unmatched ledger lines. These are items your books have and the bank does not: cheques not yet presented, deposits in transit.
- Record the missing entries. Post the bank-only items to the ledger.
- Calculate the adjusted balances. Statement balance, plus deposits in transit, minus outstanding payments, should equal the ledger balance.
- Sign and file. A second person reviews and signs. Keep the statement and the reconciliation together.
Worked example
A company's ledger shows S$48,200 in the bank account at month-end. The statement shows S$51,450.
| Item | Amount (S$) | |---|---| | Statement closing balance | 51,450 | | Less cheques issued, not yet presented | (3,500) | | Add deposit made on the last day, not yet cleared | 600 | | Adjusted bank balance | 48,550 | | Ledger balance | 48,200 | | Difference | 350 |
The S$350 difference is not a timing item. Searching the statement shows a bank fee of S$50 and a customer payment of S$400 that the ledger has not recorded. After posting both, the ledger becomes 48,200 − 50 + 400 = 48,550, which matches the adjusted bank balance. The reconciliation is complete.
This example is illustrative, not from a client.
What are the common timing differences?
| Item | Where the difference appears | Resolution | |---|---|---| | Cheque issued, not presented | Ledger lower than bank | Wait for clearing; list as outstanding | | Deposit in transit | Ledger higher than bank | Clears in the next days; list as in transit | | Bank fees and interest | Bank only | Post to the ledger | | Direct debit not recorded | Bank only | Post to the ledger with the supplier | | Customer payment without a reference | Bank only | Identify the customer, apply to the invoice | | Foreign-currency payment | Amount differs by rate and fee | Record the rate and the fee separately | | Duplicate entry | Ledger only | Reverse the duplicate | | Transposed digits | Either | Correct the entry |
Anything that remains after these is an unexplained difference. Investigate it before you close the month.
How often should a small company reconcile?
- Monthly is the minimum.
- Weekly suits companies with many receipts or tight cash.
- Daily suits companies that take payments through the day.
More frequent reconciliation makes each one shorter, because fewer lines pile up and the context is fresh. A monthly reconciliation of 400 lines takes long. Four weekly ones of 100 lines each are quicker and catch errors sooner.
Which parts can be automated?
| Step | Automatable | Notes | |---|---|---| | Get the statement | Yes | Bank feed or file import | | Match by amount, date and reference | Yes | Rules with a stated tolerance | | Match one payment to several invoices | Partly | Suggest combinations; person approves | | Identify customer from a payment description | Partly | Name and reference matching with a confidence score | | Post fees and interest | Yes | Rule per description | | Explain an unexplained difference | No | Needs a person | | Review and sign | No | A named person |
Your accounting software's bank feed does part of this. See our comparison of Xero bank feeds and automated bank reconciliation and the guide to automating bank reconciliation in Singapore for where feeds stop and custom matching starts.
What controls make reconciliation reliable?
- Segregation of duties. The person who records payments does not reconcile them, and the person who approves payments does not sign the reconciliation.
- Same-day cut-off. Reconcile to the statement date, not to "when I got to it".
- No plugs. Never post a balancing entry to make the figures agree. Investigate instead.
- Evidence. Keep the statement, the reconciliation and the reviewer's sign-off.
- Aged items. List outstanding cheques and deposits older than 30 days and chase them.
The 30-day threshold is our rule of thumb, not a statutory limit.
Where do small companies go wrong?
- They reconcile only when the auditor asks.
- They accept a bank feed without comparing it to the statement. Feeds can miss lines or duplicate them.
- They leave small unexplained differences because the amounts look trivial. Small differences can hide a pattern.
- They merge several bank accounts into one reconciliation.
- They do not reconcile card accounts and wallets.
Where KYN fits
KYN builds reconciliation into the finance system in the client's own cloud account. For a manufacturer, the ledger reached 3,309 reconciled rows with zero duplicates. Matches outside the stated tolerance go to a named person, and every action is logged with the actor. Money and postings wait for approval. See finance systems.
The first 14 days are a review of your stack and interviews with your team. A full build ships in under 90 days. The system runs in a cloud account in your name.
Frequently asked questions
What is the difference between a bank statement and a ledger?
The statement is the bank's record of what moved through your account. The ledger is your record of what you intended and recorded. Reconciliation explains the difference between them.
Do I need to reconcile if I use a bank feed?
Yes. A feed imports the lines. It does not confirm that your books are complete or that the closing balance agrees. Compare the feed's closing balance to the statement.
Who should sign off a reconciliation?
A person other than the one who prepared it. In a small business that can be the owner or an external accountant, who reviews the reconciliation and the outstanding items.
Checked 30 October 2026.
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