A bank reconciliation is simply the monthly answer to one question: do the books and the bank agree? The bank statement is the independent record the school never writes itself, so it is the natural referee. When the two records match, the school can say with confidence how much money it has. When they do not match, the reconciliation is how the school finds out why - and every school finds out eventually.
Why the reconciliation is the check that matters
The reconciliation sits at the centre of school finance because it does three jobs at once:
- It proves the money exists. The balance in the ledger and the balance at the bank are the same number, with every difference explained. No unexplained gap, no hidden shortfall.
- It catches the quiet errors. A fee posted twice, a refund paid twice, a bank charge never recorded, a deposit credited to the wrong account - each one is a difference on the reconciliation that gets looked at.
- It is the first line of fraud detection. Money that moved without approval, a payment diverted to a new beneficiary, an old account drained slowly - these all show up as differences the moment the books are held against the bank statement. Fraud thrives in schools that do not reconcile.
That is why the reconciliation belongs on the calendar as a fixed monthly task, not something done when there is time. The month-end checklist treats it as the centrepiece for good reason.
What you need before you start
A reconciliation needs three things, and they are all easy to collect:
- The bank statement for the month, covering the full period to the closing date. If the statement is downloaded, check that it is complete and matches the bank's own totals.
- The cashbook or bank ledger from the school's records: every payment and receipt the school recorded for the same month.
- The previous month's reconciliation. The opening balance and the list of outstanding items carry over, so a clean start depends on knowing where the last month ended.
Work to the same closing date on both sides. Most schools reconcile to the last day of the month, which keeps the numbers comparable and the audit trail simple.
Step by step: running a clean reconciliation
- Confirm the opening balance. The balance at the start of the month in the books matches the bank's opening balance, or any difference is already explained on last month's reconciliation.
- Tick off the deposits. Work through every receipt in the cashbook and find it on the bank statement: date, amount, and bank reference. Mark both sides. Receipts recorded but not yet on the statement become outstanding deposits.
- Tick off the payments. Do the same for payments and transfers. Payments issued but not yet cleared (standing orders pending, cheques still to be presented, transfers still to arrive) become outstanding payments.
- Tick off the bank's own items. Now read the statement for things the school never recorded: bank charges, interest, rejected debit orders, commission. Every one of them needs an entry in the books.
- Total the differences. List the outstanding deposits and outstanding payments, and adjust the closing bank balance for them.
- Check that it balances. The adjusted closing balance should equal the closing balance in the school's books. If it does, the reconciliation is signed and dated.
Doing this on paper, in a spreadsheet, or in the school's fee system are all fine. What matters is that the steps happen every month, in order, with nothing skipped because "it will sort itself out next month".
The five differences you will keep seeing
In practice, almost every mismatch is one of a small handful of things:
- Outstanding deposits. Money received late in the month, recorded in the books but still clearing. These should be gone from the list by the next month.
- Outstanding payments. Payments made but not yet cleared by month end. Same rule: they should clear, and if they stay outstanding for months, that is the first thing to investigate.
- Bank charges and interest. The bank moves money that the school never recorded. The fix is an entry in the books, not an adjustment to the bank.
- Recording errors. A figure transposed, a payment posted to the wrong account, a receipt entered twice. Find the original entry and correct it properly, never by force.
- Items you genuinely do not recognise. A deposit from an unknown source, a payment to an unknown payee. Do not leave these unexplained - they are exactly the items an auditor will pull out.
The rule that keeps reconciliations honest: every difference gets a reason, and every reason is written on the reconciliation. A list of unexplained differences is not a reconciliation, it is a collection of loose ends.
When it will not balance
It happens to everyone, and the way out is methodical, not clever:
- Check the obvious first. Is the month the same on both sides? Is the opening balance carried correctly? Are deposits and payments matched to the right amounts, not just the right names?
- Look for transposed digits. If the difference is divisible by 9, a 51 and a 15, or a 74 and a 47, are often the culprit. Recheck amounts entered this month.
- Check for offsets. A receipt and a payment of the same size can both be missing - they cancel each other out on the total but are two separate errors.
- Check rejected and returned items. A debit order that bounced, a deposit returned to the sender, an EFT that failed after being recorded as paid.
- Never force it. Adding a "correction" entry to make the numbers match without knowing why is how small errors become large ones. If it will not balance after a genuine effort, ask a second person to look with fresh eyes - a second pair of eyes is a control, not a failing.
The monthly rhythm that makes it stick
A reconciliation is only as good as the routine around it. Schools that reconcile well tend to follow the same pattern:
- A fixed date. The reconciliation happens on a set day shortly after month end, every month, booked into the calendar. It does not wait until the auditor asks.
- Signed and dated. The person who ran it signs and dates it. That signature is the proof the check happened, and it matters to the audit file.
- A second review. Where the school has more than one person, the bursar runs it and the principal or board member reviews the signed version. Separation of duties at its cheapest.
- Kept with the month-end pack. Reconciliations live together with the month's reports, in order, so anyone can find any month in under a minute.
- Stale items followed up. Anything still outstanding after two months gets resolved or escalated, not carried forward forever.
Keep every monthly reconciliation. The auditor will want to see them, and the audit pack expects them - a full year of clean, signed reconciliations answers half the questions in an audit before they are asked.
Sources & further reading
- Internal Financial Controls for Independent Schools - the control framework that makes reconciliation a habit.
- The Bursar's Month-End Finance Checklist - where the reconciliation sits in the wider month-end routine.
- Audit Pack Checklist - the schedules the auditor asks for, including a year of signed reconciliations.
- SAICA - professional guidance on bookkeeping and accounting standards.
This page is general information, not financial or accounting advice. Reconciliation procedures vary with the school's fee system, bank and legal structure. Confirm the approach that applies to your school with your accountants or auditors.
