3 Of The Most Common Bank Reconciliation Mistakes

If your bank reconciliation is off at the end of the month, you may be getting a little frustrated. Depending on the volume of transactions you do, it can be extremely difficult to find a single error. But it's still important to track down any issues. Even a seemingly minor problem, such as being off a few cents, could actually signify a larger accounting problem.

1. Transposition Errors

A transposition error is very simple. You might enter in a transaction as $12.34 when it was actually $12.43. You can identify a transposition error because your ending reconciliation will often be off by a number which includes the number "9" (because transposition numbers are flipped). These can be very difficult to locate because the numbers look so similar. The most effective way to find a transposition error is to find someone else to read off the real numbers one by one, while you check your ledger for accuracy.

2. Customer Allocation Errors

If your customer accounts are not accurate but your bank reconciliation seems to be, it's likely that the same number in a transaction is being checked off but the customer attached is different. In your bank reconciliation, you may have checked off a $300 payment from John Smith when the $300 payment was really from Jane Smith. Everything will appear accurate through the reconciliation, which makes this difficult to catch. To resolve this, make sure you specifically check and note the names when applying payments.

3. Incorrect Check Entries

Check entries can be incorrect for two reasons: outstanding checks may remain outstanding for too long or the wrong checks may be included in the reconciliation. You should always check the checks by check number in addition to amount -- otherwise you could clear check #122 for $400 when you should have cleared check #123 for $400. Checks should also be voided after they have expired, which is usually after 90 days. If you don't void checks on a regular basis, it will appear as though you have far less money in your account than you actually do, even though the reconciliation will be correct.

Frequent issues in bank reconciliation are often caused by problems in the actual accounting protocols. Automating your processes -- such as bringing transactions automatically in through a bank account -- can reduce many human mistakes. There are also many accounting services like Hurren Sinclair MacIntyre CPA's LLP that will perform all data entry and reconciliation for you, to improve upon your accuracy.


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