Bank reconciliation, and what it actually proves
Reconciliation has a reputation as bookkeeping ceremony. It is not. It is the only routine check that catches the invoice you never recorded, the expense you recorded twice, and the customer payment that never arrived. Everything else in your books is an assertion. This is the part that tests it.
What reconciling actually tests
You are comparing two independent records of the same events: what the bank says happened, and what you recorded. Where they agree, both are probably right. Where they disagree, one of them is wrong and it is usually yours.
- Income received but never invoiced, which understates your sales and your VAT
- The same expense entered twice, once by hand and once from an import
- An invoice marked paid that no money ever arrived for
- Personal spending sitting in the business account, which is not an allowable cost
- Bank charges and interest nobody thought to record
Matching, and the rules that do it for you
Most matches are obvious and should not need a human: an amount and a date near an open invoice, a recurring supplier payment that is always the same category. Rules you set once are applied to incoming transactions, so what reaches you for review is the ambiguous remainder rather than the whole statement.
Unreviewed imports are a filing problem, not a tidiness problem
Imported transactions are pending until approved, and pending means absent from your figures. File a VAT return with a batch still sitting there and you have filed an understated return, which is a correction rather than a nuisance. The pre-filing checklist treats an unreviewed batch as blocking for that reason, not to nag you into a clean screen.
The items that never match
Some differences are real and permanent. A payment in transit at period end, a cheque not yet presented, a card transaction authorised but not settled. These are timing differences rather than errors, and the point of reconciling is to be able to name each one rather than to force the two numbers to agree. A reconciliation that balances because someone posted an adjustment to make it balance has proved nothing.
How often is often enough
Monthly is comfortable and quarterly is the practical minimum if you file VAT quarterly, because reconciling for the first time on the day the return is due is how errors get filed. If you are catching up on several closed periods, import by CSV rather than by connection: the file has no window limit and you can work through a period at a time.
Common questions
What does it mean to reconcile a bank account?
To compare your own records against the bank's for the same period and account for every difference. Not to make the two figures equal, but to be able to explain each item that appears in one and not the other. Timing differences are legitimate; unexplained differences are errors you have not found yet.
How often should I reconcile?
Monthly if you can, and at least once per VAT quarter before you file. Reconciling for the first time on the deadline means any problem you find is now urgent, and some of them take a bank statement request to resolve.
Why does my reconciliation not balance?
Usually one of a short list: a transaction recorded on a different date to the bank, an amount transposed, an entry recorded twice, or something in transit at the period end. Work from the largest difference down rather than reading every line, and never post an adjustment purely to make it balance.
Do unreconciled transactions affect my VAT return?
Imported but unapproved transactions are not in your figures at all, so filing with them pending understates the return. That is why the pre-filing checklist blocks on it. Approved but unmatched transactions are in your figures but not tied to an invoice, which is less serious and still worth resolving before year end.
Can my accountant see the reconciliation?
Yes, through the accountant portal, and anything they do is recorded on your activity log as done on your behalf. That is generally what an accountant wants first, because a reconciled bank is what makes the rest of the books worth reading.
Last updated 2026-08-10. Thresholds, rates and allowances are indexed or reset at fiscal events and are deliberately not quoted here; check GOV.UK for current amounts.