Bank Reconciliation Policy, Procedure, & Process

This was mentioned in the Policies & Procedure newsletter issue. If you happened across this page without reading that, go here to read it.

Policy: Bank Reconciliation Policy

Purpose: To ensure the accuracy and integrity of the financial records by regularly reconciling the bank statements with the company’s accounting records.

Scope: This policy applies to all accounts maintained by the company and is relevant to the finance and accounting departments.

Policy Statement:

1. Frequency: Bank reconciliations must be performed on a monthly basis.
2. Responsibility: The finance manager is responsible for ensuring that all bank accounts are reconciled accurately and on time.
3. Review and Approval: Completed bank reconciliations must be reviewed and approved by the Chief Financial Officer (CFO).
4. Documentation: All bank reconciliation reports must be retained for a minimum of seven years.
5. Discrepancies: Any discrepancies identified during the reconciliation process must be investigated and resolved within five business days.

Procedure: Bank Reconciliation Procedure

Purpose: To provide detailed instructions on how to perform a bank reconciliation.

Steps:

1. Gather Documents:
   1. Obtain the monthly bank statement from the bank.
   2. Retrieve the corresponding general ledger (GL) cash account records.
2. Compare Records:
   1. Compare the transactions listed on the bank statement with those in the GL.
   2. Mark off each transaction that appears in both records.
3. Identify Discrepancies
   1. Note any transactions that appear in the GL but not on the bank statement (e.g., outstanding checks).
   2. Note any transactions that appear on the bank statement but not in the GL (e.g., bank fees, interest income).
4. Adjust Entries:
   1. Prepare adjusting journal entries for items such as bank fees, interest income, or errors found in the GL.
   2. Record these adjustments in the accounting system.
5. Reconcile Balances:
   1. Calculate the adjusted bank balance by adding/subtracting outstanding items to/from the bank statement balance.
   2. Compare the adjusted bank balance to the GL balance. They should match.
6. Review and Approval:
   1. Submit the completed bank reconciliation report to the finance manager for initial review.
   2. After the finance manager’s review, forward the report to the CFO for final approval.
7. Documentation:
   1. File the bank reconciliation report along with supporting documents (bank statement, GL printout, and adjustment entries) in the designated reconciliation file.

Process: Bank Reconciliation Process

1. Why: To ensure the accuracy and completeness of financial records by systematically reconciling bank statements with accounting records. This process helps in identifying discrepancies, errors, and potential fraudulent activities.

2. The software, tools, or log-ins needed to complete the task

   1. Quickbooks
   2. Bank Name
   3. Microsoft Excel Bank recon template

3. Video and written step-by-step instructions, down to what buttons to click

   1. Link to loom recording
   2. Written Instructions: be as specific as possible. Tell me what buttons to click, where to navigate, and things to watch out for.

4. Any specific templated language or copy/paste info

   1. Journal Entry Description for Bank Fees: “Bank fee for [Month] [Year].”

   2. Journal Entry Description for Interest Income: “Interest income for [Month] [Year].”

   3. Email language upon completion sent to Finance Manager:

      Subject: Bank Reconciliation Report for [Month] [Year]

      Dear [Manager’s Name],

      Please find attached the bank reconciliation report for [Month] [Year] for your review and approval.

5. Completion checklist:

   • [ ] Bank statement and GL records are obtained.
   • [ ] All transactions are compared and discrepancies identified.
   • [ ] Necessary adjustments are made in the accounting software.
   • [ ] Adjusted bank balance matches the GL balance.
   • [ ] Reconciliation report is reviewed and approved by the finance manager and CFO.
   • [ ] All documents are filed correctly.

6. Any “lessons learned” or things to watch for:

   1. Common Issues:
      1. Missing transactions: Double-check that all transactions are recorded in both the bank statement and GL.
      2. Incorrect adjustments: Ensure all adjustments are accurately entered with the correct amounts.
      3. Timing differences: Be aware of transactions that may appear in the bank statement but not yet in the GL due to timing differences.
   2. Tips:
      1. Regularly update the accounting software to avoid discrepancies caused by outdated systems.
      2. Maintain clear communication with the bank to quickly resolve any discrepancies.
      3. Keep a detailed log of all adjustments made during the reconciliation process for future reference.