Reconciling is the least glamorous thing in bookkeeping and the only step that proves any of the rest of it is true. Categorizing decides what a transaction means. Reconciling decides whether it happened at all.
Skip it and everything downstream is a guess: a profit figure built on transactions nobody confirmed, a cash balance that drifts from the bank a little further every month. Here is how to do one properly, and what to do when it will not balance.
What a reconciliation actually proves
A reconciliation compares what your books say happened in an account against what the bank says happened, for one specific period, and confirms the two agree. If they do, every transaction is recorded once, nothing has been invented, and the closing balance in your books is real money.
That test catches the errors nothing else will. Duplicated transactions from a bank feed importing twice. Payments that never cleared. Charges you were never told about — a subscription renewal, a chargeback, a processor fee. Owner transfers recorded on both ends and counted as two separate events. None of those look wrong sitting in a categorized transaction list. All of them show up the moment the balances have to agree.
It is not only for checking accounts. Credit cards, loans, lines of credit, and merchant processing accounts all get reconciled the same way, against their own statements. Credit cards are usually the messiest and the most worth doing, because that is where personal charges and duplicate entries collect.
The steps
Start with the statement for the period, not the balance showing in online banking today. A reconciliation is always for a closed period with a fixed ending date and a fixed ending balance, and the beginning balance should match the ending balance of the period before it. If it does not, stop — something in a period you already closed has been changed.
Then match every line. Work through the statement item by item and tick off the matching entry in your books. Anything on the statement with no entry in the books gets added — bank fees, interest, automatic charges you had forgotten. Anything in the books with nothing on the statement gets investigated rather than deleted: a check written on the 28th that had not cleared by the 31st is legitimately outstanding, but a payment sitting uncleared for four months usually means it never happened or was entered twice.
Finish with the balance. Your book balance plus deposits not yet credited, less payments not yet cleared, should equal the statement ending balance exactly. Not close. Exactly. When it does, lock the period so nothing can be edited behind you, and keep the statement filed with the reconciliation.
When it does not balance
The difference itself is usually the clue. If it is exactly the amount of a transaction you can find, that transaction is entered twice, missing, or sitting in the wrong account. If it is divisible by nine, you have almost certainly transposed digits somewhere — 87 entered as 78. If it is exactly twice a transaction amount, something is recorded with the sign reversed: a deposit entered as a payment.
The other common causes are structural. A transfer between two of your own accounts recorded as both an expense and income rather than a single movement. A payment recorded against the wrong bank account entirely. A date that lands one day outside the statement period, which is not an error so much as a timing difference to carry forward.
What you must not do is force it. Every accounting package offers to write an adjusting entry to make the difference disappear, and taking that offer converts a small, findable error into a permanent unexplained number that pollutes every future period. The difference is telling you something specific. A forced balance is not a reconciliation — it is the appearance of one.
Do it monthly, or have it done
Monthly is the right cadence, within a few days of the statement arriving. Errors are cheap to find while you still remember the transactions and expensive once twelve months of them are compounding on top of each other. Most catch-up projects are not really catch-up work at all; they are one unreconciled account that nobody looked at for a year.
If it is not getting done, having someone else do it is the reliable fix. Evolv Bookkeeping is $199 per month flat — every account reconciled against the actual statement, transactions categorized against a real chart of accounts, and your P&L and Balance Sheet delivered by day 2 of the following month, with 1099 prep at year end. If you are already behind, catching up a backlog is a flat $500 one time however far back it goes, finished within 2 days and guaranteed in writing. No contracts, cancel anytime, and you can get an instant quote on our homepage.