Bank reconciliation basics

Why the two balances differ

Your books and the bank record the same money at different moments. You book a cheque the day you issue it; the bank records it when the supplier deposits it. The bank deducts charges you have not yet entered. A customer pays by UPI and your accountant enters it two days later. None of this is an error, but each difference must be explained.

Differences that cannot be explained are the ones that matter: a payment entered twice, a receipt posted to the wrong party, or money that left the account without anyone booking it.

The four usual reasons for a difference

A worked reconciliation

Mehta Hardware, current account, 31 August.

The last two lines are entries missing from the books. After you post the ₹18,200 receipt and the ₹1,180 charges, the books show ₹3,79,420 and the only remaining differences are timing items: the two cheques and the uncleared deposit.

Step-by-step monthly routine

1. Download the bank statement for the month (PDF or Excel from net banking).
2. Open the bank ledger in Tally for the same period.
3. Tick off each entry that appears in both, by amount and date. Cheque numbers and UTR references help.
4. List entries in the bank but not in books. Post them: charges, interest, direct receipts, auto-debits.
5. List entries in books but not in the bank. Note them as timing differences with dates.
6. Set the bank date for cleared items in Tally's bank reconciliation screen, so next month starts clean.
7. Investigate anything older than 30 days on the timing list. Stale cheques and unidentified receipts do not fix themselves.

If your business has several bank accounts and a CC limit, reconcile each one separately. Transfers between your own accounts should be entered as contra vouchers and appear on both statements on the same or next day; an unmatched transfer is a common source of differences.

Unidentified receipts: the hardest part

Customers often pay by NEFT or UPI with no bill reference. Do not park these in a suspense ledger for months. Instead:

• Match the amount against outstanding bills of customers with similar names.
• Ask the salesperson who handles that area.
• Ask customers to mention bill numbers in the payment remark, and say so on your payment reminders.
• If still unknown after a week, book it on account to the most likely party and confirm with them.

Booking receipts against the right bills keeps ageing reports accurate and avoids reminding a customer who has already paid.

Receipts from payment apps and card machines often arrive as one settlement net of charges. Book the gross sales, the charges and the net settlement separately so the bank line matches and the charges are visible as an expense.

Red flags to look for

• The same amount paid to the same supplier twice in a month.
• Payments to a party who is not in your supplier list.
• Cash deposits that do not match the cash book.
• Cheque returns that were not reversed in the customer's ledger.
• Large round-figure transfers with no voucher behind them.

Reconciliation is one of the simplest internal controls you can have. Ideally the person who reconciles is not the person who makes payments.

Where Cashflow OS helps

The reconciliation itself happens in Tally against your bank statement; Cashflow OS does not connect to bank feeds. What it does give you is the bank book and cash book synced from Tally on your phone, so you can check balances and spot unusual entries any day. Accountants with the right role can post a missed receipt, payment or contra voucher from the phone or web app, and Tally validates it before it is saved. See create vouchers from your phone.