What gets reconciled?
There are several related checks, rather than one comparison of invoices with the bank:
- AR subledger to general ledger: Reconcile customer and invoice balances to the receivables control account.
- Cash ledger to bank: Explain differences between recorded cash and the bank statement.
- Processor activity to settlements: Match gross transactions, fees, refunds, reversals, and settlement timing.
- Receipts to invoices: Identify unapplied cash, short payments, and allocation errors.
An accounts receivable balance is not expected to equal a bank balance. They represent different things.
Example
A processor records $1,000 of customer payments and deducts $30 in fees before depositing $970. The reconciliation explains the gross receipts, fee expense, and net deposit. It should not create a $30 customer shortfall solely because the deposit was net of fees.
Record entries according to the organization's accounting policy and supporting documents.
A practical close process
Set the reporting cutoff and gather complete source records. Match transactions using reliable identifiers and investigate duplicates, missing receipts, returns, credits, and foreign-currency differences where relevant.
Separate genuine errors from timing items such as deposits in transit. Assign an owner and resolution date to open items.
Post only supported, approved adjustments. Do not use an unexplained write-off merely to force balances to agree. Retain the reconciliation and reviewer sign-off.
Why it matters to collections
An applied payment or approved credit should reach the collection workflow before the next action. Reconciliation can expose stale balances that would otherwise lead to incorrect reminders.
Related terms: Outstanding Balance and Monthly Statements.