Bank reconciliation: how the bank always reconciles

What is bank reconciliation?

The bank account in the chart of accounts mirrors the real bank account: every time money goes in or out at the bank, there must be one entry on it in the books with the same amount and date. Reconciliation is holding the two against each other: the bank's balance on a day against the account's balance in the books that day, and the bank's movements against the entries.

If they agree, no movement is missing and none is booked twice. If they do not, there is an error somewhere, to be found before the accounts can be used for anything: VAT, the annual report or just how much the business has earned. Traditionally the reconciliation was done monthly with the statement in hand; with open banking the application does it every day.

Why do differences arise?

• A movement at the bank is not booked yet: the invoice is sitting in the journal, or the line has not come in at all.
• A movement is booked twice: once from the bank and once from an invoice or a receipt that was typed as its own entry.
• The amount or the date is wrong in the books: a typing error, or an invoice booked with its own amount where the bank deducted a fee.
• An entry sits on the bank account which the bank never saw: a manual entry that should have gone to another account.
• The bank shows something it has not booked yet: card reservations and pending transfers, which the bank's own balance may or may not count.
• The opening balance is wrong: the books started on a date with a balance other than the bank's.

How Veneti does it automatically

You connect the bank once through open banking: sign in with MitID to your own online bank, personal or business, and choose which account in the chart of accounts the movements are booked to, and from which date. From then on Veneti fetches the transactions every day, and every transaction becomes exactly one line in the journal with the bank account as offset account. It is described under Banking and coding.

The other half of the rule matters just as much: from the start date, the bank account belongs to the import alone. No other entry can be put on the bank account with a date the import covers, so an invoice or a receipt can never end up sitting there beside the bank line. Invoices are booked to Debtors and Creditors, and the bank line settles them when the payment arrives. Dates before the start date are history, which you can still book yourself.

At every fetch, Veneti stores the bank's own balance and holds it against the account's balance in the books, journal lines included. If they agree, it reads Reconciled. If not, the bank's line in the journal turns red with the difference, and the integrations page names the vouchers that explain it: a movement not imported, a voucher the bank no longer shows, a changed amount, a duplicate, or a line on the bank account with no bank movement behind it. Pending movements at the bank that explain the difference exactly are named separately, so a card reservation does not look like an error.

The import also checks itself: every movement carries the bank's own id, so none is fetched twice, and a line you delete in the journal comes back at the next fetch, because the bank still has it.

When the bank does not reconcile

1. 1

   Read the difference

   The bank's line in the journal shows the amount. An amount that matches one voucher is usually one voucher; an odd amount is most often two errors on top of each other.

2. 2

   Open the bank card under Integrations

   The card names the vouchers that explain the difference and what is wrong with each of them. Start there; Veneti has already done most of the detective work.

3. 3

   Book what is missing

   If the explanation sits in the journal, it simply is not booked yet. Code the line and book it.

4. 4

   Correct what is wrong

   An amount that differs from the bank's is corrected in the journal if the voucher is not booked. If it is booked, the difference is moved with a general journal voucher.

5. 5

   Check the pending items

   If the card shows the bank's pending movements and they explain the difference exactly, there is nothing to do: they are booked when the bank books them.

6. 6

   Fetch the bank again

   After the correction, fetch the bank, and the line switches to Reconciled. If a long time passes between visits, the bank may ask for a new MitID sign-in; the bank card says so when the connection needs renewing.

The line nobody can explain

Now and then a movement stands at the bank that nobody remembers: an amount without text, a transfer from a name nobody knows. Do not delete it. The bank has the movement, and a deleted line comes back at the next fetch, so deleting solves nothing. Do three things instead: search your email and the company's inbox for a receipt with the amount, and attach it to the line if it exists; ask the bank, which can see more about the sender than you can; and ask Luca, who knows the company's earlier entries and can see whether the amount resembles something you have booked before.

If the line still cannot be explained, code it to the account it most likely belongs to, write in the description that it is unresolved, and book it so the bank reconciles. When the explanation turns up, move the amount with a general journal voucher. Accounts that reconcile with a known uncertainty in them are better than accounts that do not reconcile. Receipts that attach themselves to the bank line are described under Receipts and documents, and the ground rules in Bookkeeping for beginners. To see your own bank reconcile, Get started.

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