A practical guide to bank reconciliation exceptions.
Unmatched activity is a question to resolve, not a line to force into balance. Use a consistent trail from the bank record to the decision and review.
Keep the item, the explanation, and the decision together.
Reconciliation procedures should follow your company's accounting policies and approval controls. This guide is a general workflow for organizing investigation, not a substitute for those policies.
What a completed reconciliation should be able to prove
If a reconciliation cannot answer these four questions, it is a snapshot rather than evidence.
- Every bank line in the period is either matched, explained, or explicitly listed as an open item.
- The cleared items tie to the general ledger, and the reconciling difference is fully itemized.
- Each reconciling item has a named owner and a next action, not just a description.
- A second person can re-perform the reconciliation from the retained evidence alone.
Six steps from population to sign-off
- STEP / 01
Establish the population
Confirm the bank account, statement period, currency, opening balance, ending balance, and the ledger activity included. An unmatched population is often a scope problem, not a matching problem.
- STEP / 02
Match supported activity
Use amount, date, reference, and counterparty as evidence. Keep partial, grouped, or manually adjusted matches visible to the reviewer rather than folding them into a clean line.
- STEP / 03
Classify each exception
Describe what differs and what evidence is still needed. Avoid a generic label like 'timing' without a clearing date or a traceable source.
- STEP / 04
Investigate with a source
Trace the item to the originating system, the posting period, and the approval path. Record contacts and steps taken for unidentified items.
- STEP / 05
Decide and record
Clear the item with a reference, post an entry with a reason, or carry it forward with an owner and a date. All three are acceptable; an unrecorded decision is not.
- STEP / 06
Review and sign off
A reviewer confirms the population, the reconciling difference, the disposition of each exception, and that preparer and reviewer are different people.
Fields worth keeping on an exception log
These are the fields that let someone else pick the item up a month later without calling the preparer.
| Field | Why it matters |
|---|---|
| Account and statement period | Scopes the item; prevents it being re-investigated in the wrong period |
| Item description and amount | Distinguishes similar items that appear in consecutive periods |
| Exception type | Allows repeat patterns to be reported and fixed rather than re-explained |
| Source or reference | The traceable pointer that makes the investigation re-performable |
| Investigated by / date | Separates the act of looking from the act of deciding |
| Disposition | Cleared, entry posted, or carried forward |
| Owner and next review date | Prevents an open item from becoming nobody's item |
| Reviewer and review date | Shows the control operated, not just the work was done |
Common exception cases
Classify the item before investigating it. The classification tells you who can resolve it and what evidence to collect.
Timing difference
Check settlement dates, bank cutoffs, and in-transit activity. Record the expected clearing date and the supporting reference so the next cycle can confirm it cleared.
Amount or fee difference
Compare gross and net amounts, bank charges, withholding, and currency conversion. Separate a known fee from an unexplained variance.
Missing ledger entry
Trace the bank line to the source system, posting period, and approval path. Record the owner and due date for any entry that is required.
Possible duplicate
Compare date, amount, counterparty, reference, and reversal history before treating similar lines as duplicates. Check whether a reversal is simply pending.
Unidentified receipt
Retain the original bank detail, record the contact or investigation steps, and assign a review date. Do not clear an unidentified item without support.
In-transit item never cleared
An item carried as in-transit beyond the expected window is no longer a timing difference. Reclassify it, investigate the source, and record the decision.
Feed or statement mismatch
When the bank feed and the statement disagree, stop and resolve the feed before reconciling. Otherwise every downstream line inherits the error.
Intercompany transfer not mirrored
Confirm the receiving entity recorded the offset. A one-sided transfer is an exception on both reconciliations, not just one.
Questions for the reviewer
Use these to test the reconciliation rather than confirm it.
- 01Does the population cover every account in scope, including new and closed accounts this period?
- 02Is the reconciling difference itemized, with each line having its own explanation?
- 03Were any matches created by manual override or manual adjustment in the system?
- 04Do all open items have an owner and a next review date?
- 05Is any item older than the team's aging threshold, and what is being done about it?
- 06Did anyone adjust the reconciliation to match the statement rather than investigating the difference?
- 07Are preparer and reviewer different people for every account in scope?
What would a second reviewer need?
Keep the bank evidence, ledger reference, explanation, preparer, reviewer, and date together. If the item is still open, include an owner and a next action. An item that cannot be explained without the original preparer is not yet an exception record.
How does your team handle open items?
We're interested in how finance teams organize exceptions and review evidence across their close.