Bank Reconciliation Workflow

Learn the complete bank reconciliation workflow: import, matching, and verification.

Bank Reconciliation Workflow

Bank reconciliation is a fundamental control process in accounting. It ensures that the bank transactions recorded in your books match the actual movements on your bank statement. This guide explains why bank reconciliation matters and how to carry it out efficiently.

Why Is Bank Reconciliation Important?

Without regular bank reconciliation, errors can go unnoticed until the year-end audit or a tax inspection:

  • Missing entries -- a payment was executed at the bank but never recorded in the books
  • Duplicate entries -- a transaction was accidentally booked twice
  • Amount mismatches -- a typo during manual data entry
  • Unauthorized transactions -- bank fees, direct debits, or erroneous charges
  • Timing differences -- a payment made at month-end appears on the next statement

Regular reconciliation is not just good accounting practice; it is also a legal requirement: Under CO Art. 957a, bookkeeping must be complete, truthful, and verifiable.

How Often Should You Reconcile?

Frequency Recommendation
Monthly Recommended for most SMEs. Errors are caught promptly.
Weekly Advisable for high transaction volumes or multiple bank accounts.
Quarterly Minimum requirement, e.g. for VAT reporting. Errors are harder to trace.
Annually Required as part of year-end closing, but insufficient as the sole reconciliation.

Best practice: Reconcile your accounts at least monthly, ideally at month-end.

The Reconciliation Process Step by Step

Step 1: Obtain the Bank Statement

Download the current bank statement. Swiss banks typically provide transaction data in CAMT.053 format (ISO 20022) -- the standard for electronic account statements in Switzerland.

Step 2: Verify the Opening Balance

Compare the opening balance on the bank statement with the closing balance from your last reconciliation (or the current book balance of the bank account). These must match. If they do not, there is an error in the previous reconciliation.

Step 3: Match Transactions

Go through each transaction on the bank statement and match it to an entry in your books:

  • Incoming payments -- match customer payments to open receivable invoices
  • Outgoing payments -- match supplier payments to open payable invoices
  • Bank fees -- book as an expense (account 6940 or similar)
  • Interest credits/charges -- book as financial income/expense
  • Standing orders and direct debits -- match to the corresponding entries

Step 4: Identify Discrepancies

After matching, some transactions may remain unmatched:

  • On the bank statement but not in the books: Create the missing entry (e.g. bank fee, interest, direct debit)
  • In the books but not on the bank statement: Check whether the payment is still pending (not yet settled), or whether there is a booking error
  • Amounts differ: Investigate the difference -- typo, partial payment, or exchange rate variance?

Step 5: Verify the Closing Balance

After all matching and corrections, the closing balance in your books must equal the closing balance on the bank statement:

Book balance + unrecorded incoming payments - unrecorded outgoing payments = Bank statement balance

If the balances agree, the reconciliation is complete.

Common Causes of Discrepancies

Cause Solution
Forgotten bank fees Book as an expense
Duplicate booking Reverse the erroneous entry
Typo in amount Correct the entry
Timing delay (value date) Wait for the next statement and match there
Exchange rate difference (foreign currency) Book the difference as financial income/expense
Unauthorized debit Dispute with the bank

Best Practices

  • Reconcile regularly -- monthly is the minimum standard
  • Download statements promptly -- the sooner you reconcile, the fresher your memory
  • Use automation -- CAMT import saves enormous amounts of manual work
  • Four-eyes principle -- in larger organizations, have a second person review the reconciliation
  • Resolve discrepancies immediately -- unresolved differences become harder to investigate over time
  • Document the reconciliation -- record when and by whom the reconciliation was performed

How LumaBill Helps

LumaBill makes bank reconciliation fast and efficient:

  • CAMT import -- upload your bank data in ISO 20022 format and import all transactions automatically
  • Automatic matching -- LumaBill automatically matches bank transactions to open invoices and expenses
  • Manual matching -- transactions that cannot be matched automatically can be linked manually in a few clicks
  • Balance overview -- compare book balance and bank balance at a glance
  • Open items -- unmatched transactions and entries displayed clearly
  • Reconciliation log -- every reconciliation is logged and fully traceable

Further Reading

Year-End Closing