Did you know only about 67-70% of new Canadian small businesses survive past five years1? That means nearly one in three doesn’t make it. A major reason for this is management—especially how businesses manage their finances. Studies show poor financial management is a leading factor behind many early failures. (Read our post on 5 Reasons you need a Bookkeeper in Canada to learn more about why it’s crucial for business survival.)
Monthly bank reconciliation is a key best practice across bookkeeping in Canada. Though it may seem complex at first, our step-by-step guide simplifies the process into an easy routine. Regular reconciliation ensures accurate records, helps identify errors early, and keeps your business financially healthy.
Making bank reconciliation a habit is an important step toward stronger financial control and avoiding the common pitfalls that lead to business failure. Let’s walk through how to do it.
Bank reconciliation is the process of comparing your business’s financial records to your bank statement to make sure they match. This helps identify any differences, like outstanding payments or bank fees, so you can keep your records accurate and your finances in order.
8-Step Bank Reconciliation Process
Step 1: Gather Your Documents
Collect your bank statements and all transaction records for the period. If you use software like Xero, it may import bank transactions automatically.
Step 2: Check Opening Balances
Make sure the starting balance in your records matches the bank statement’s opening balance. Fix any differences before moving on.
Step 3: Compare Transactions
Go line by line to match deposits and withdrawals in your records against those on the bank statement. Don’t forget to note any bank fees or charges missing from your books.
Step 4: Spot Outstanding Items
List checks you wrote that haven’t cleared yet, deposits sent to the bank but not recorded there, and any bank fees you haven’t recorded.
Step 5: Calculate Adjusted Balances
Add deposits in transit and subtract outstanding checks from the bank statement balance to get an adjusted bank balance. Adjust your book balance with bank fees, interest, or error corrections. Both adjusted balances should be the same.
Step 6: Investigate Differences
Look for mistakes like double entries, missed transactions, or timing issues that might explain any mismatch.
Step 7: Make Adjustments
Update your records to include bank fees, interest earned, or fix any errors found during reconciliation.
Step 8: Save Everything
Keep your reconciliation report and all supporting documents for future reference and audits. When you work with a bookkeeper in Canada, this documentation becomes even more valuable for maintaining compliance and audit trails.
Outsourcing your bookkeeping is a smart move because it saves you time and money, gives you access to expert financial management and accuracy, and lets you focus on growing your business without worrying about the books.
Check out our post: Thinking of Outsourcing Your Bookkeeping? Read This First
When Professional Help Makes Sense
If reconciliation consistently takes hours or frequent errors occur, you need a bookkeeper. Professional bookkeeping prevents costly mistakes and saves time for core business activities. Many bookkeepers in Canada recommend monthly reconciliation as the foundation of financial health.
At KP BOOKS CO, we handle bank reconciliation alongside accounts payable, HST filing, and payroll processing. Our virtual services help businesses across bookkeeping Canada streamline operations while maintaining regulatory compliance. Learn more about The Importance of Accurate Bookkeeping for Canadian Tax Returns.
We use processes and modern accounting platforms to ensure accuracy, and our expertise to help you understand Canadian regulatory requirements. By hiring a professional bookkeeper in Canada, you can transform reconciliation from monthly headache into strategic business intelligence.
Whether you handle reconciliation yourself or partner with experienced bookkeepers, consistent monthly reconciliation protects cash flow and supports growth decisions. Accurate bookkeeping in Canada builds financial confidence beyond just compliance.
Don’t let bookkeeping complexity drain energy from revenue-generating activities. KP BOOKS CO makes bank reconciliation simple, accurate, and stress-free. Get in touch with us today.
