The bank says one number. Your accounting software says another. Nothing is obviously missing, every transaction looks right, and you have scrolled the same list four times.
Start here: write down the exact difference between the two balances, to the cent, before you look at a single transaction. That number identifies the cause faster than any amount of scrolling, because each kind of error leaves a differently shaped gap — a duplicate leaves a gap equal to one transaction, an unrecorded transfer leaves a round one, uncharged fees leave a scatter of small amounts, and transposed digits always leave a difference divisible by nine. Thirty seconds of arithmetic narrows the search from hundreds of lines to a handful.
The gap is almost never an accounting mystery. It is a mechanical cause from a short list, and the rest of this walks that list fastest-first.
First, make sure you are comparing the right two numbers
Many of these cases resolve here: the two figures were never meant to match. Several "bank balances" are in play:
- The available balance in your banking app, which nets off pending card authorisations. This is the one people quote and the one least likely to match anything.
- The statement closing balance on a date — what a reconciliation is supposed to agree with.
- The bank balance in your software, counting every transaction you entered, cleared or not — while the reconciled balance counts only the ones matched to the bank.
Comparing an app's available balance against your software's account balance produces a difference almost every time, and neither number is wrong. Reconcile a statement closing balance against your software's balance on that same date. Check the date boundary while you are there: if your report runs to month end and the statement to a cut-off a few days either side, the difference you are chasing is the transactions in between.
Read the difference before you hunt
| What the difference looks like | Where to look first |
|---|---|
| Exactly equal to one transaction you can see | That transaction is entered twice, or not at all |
| Exactly twice one transaction | A transfer recorded as two entries in the same direction |
| A round figure | An owner draw, a transfer between accounts, or a loan repayment |
| Lots of small amounts | Bank charges, card fees, or interest never entered |
| Divisible by nine | Two digits transposed somewhere — 540 typed as 450 |
It is a shortcut rather than a law, but it works often enough to try first. If the shape points nowhere, work the causes below in order.
Cause: money that has not cleared yet
The most common cause and the least alarming. You wrote a cheque, scheduled a payment, or banked a deposit; your books recorded it that day and the bank has not moved the money yet. The tell is a gap made of recent transactions, entered in your software and missing from the statement.
The fix: none. This is a timing difference, and explaining it is what a reconciliation is for. List the uncleared items and confirm the balances agree once you add them back. What matters is that they do clear — an item still uncleared months later is usually a failed payment or a cheque nobody banked.
Cause: duplicates from a bank feed
If your software imports transactions automatically and you also enter them by hand, you will eventually hold both versions of the same payment. Feeds re-import after a reconnection too, and a statement imported twice duplicates a whole period. The tell is a gap equal to a transaction you can find twice, or a block of activity around the date a feed was set up or reconnected.
The fix: remove the duplicate rather than adding a correcting entry, then pick one source of truth — either the feed enters transactions and you approve them, or you enter them and use the feed only to match. Mixing the two causes this. If it started when you moved systems, switching accounting software without losing your history covers what to check.
Cause: transfers between your own accounts
Moving money to savings, or paying a company card from the business account, is one transaction seen twice — once leaving, once arriving. Recorded as a transfer it nets out; recorded as an expense on one side and income on the other it distorts the bank balance and your profit together. The tell is a round-number gap appearing in two accounts with the wrong labels.
The fix: re-code both sides as a single transfer, then check your profit and loss — misclassified transfers inflate revenue and expenses at once, which is one way a business looks healthier or sicker on paper than it is.
Cause: fees, interest and charges nobody entered
Bank charges, card processing fees, foreign exchange margins, account fees, and interest paid or received all move money without an invoice arriving to remind you. The tell is several small amounts that appear on the statement and nowhere in your books.
The fix: enter them to sensible expense accounts rather than a catch-all, so you can see what banking actually costs over a year. Recurring ones can usually become rules so they code themselves.
A close relative is the payment processor payout. If you sell online, the money reaching your bank is net of fees and refunds, sometimes over a different date range — so recording that payout as your sales figure understates revenue and costs at once. Record the gross sale, the fee and the payout separately.
Cause: the opening balance is wrong
If everything after a certain date reconciles perfectly but the total is out by a constant amount, the error is not in your transactions — it is in the balance the account started from. The tell is a difference that appears in every period unchanged and does not shrink as you reconcile more months.
The fix: go back to the day the account was set up in the software and compare its opening balance with the bank's on that date. This is a classic migration artefact: a start date chosen mid-month, an opening balance typed from the wrong statement, or transactions imported from before it. Correct the opening figure rather than plugging the gap — a plug hides the error and carries it forward forever.
Cause: someone edited or deleted a reconciled transaction
Most software will let you change a transaction that was already reconciled, and then a period that balanced yesterday does not balance today. The tell is a closed month that has stopped agreeing when nothing in it was supposed to change.
The fix: use the audit log to find what changed and reverse it properly, then lock closed periods so past dates cannot be edited and corrections land in the current one. It is the most effective control a small business can add to its bookkeeping, and it costs nothing but a setting.
Cause: personal spending on the business account
A card used for a personal purchase, cash taken out, or something paid for that was never a business cost. The bank knows; the books often do not, or record it as an expense it was not. The tell is a statement line with no matching entry anywhere.
The fix: record it as a drawing or a director's loan rather than an expense, so profit stays accurate and the amount shows as owed. If it happens often, separate the accounts — mixed spending makes every future reconciliation harder and distorts the profit picture our bookkeeping basics guide is built on getting right.
The order to check them in
When you have no idea where to start, run this sequence — ordered by how quickly each step tends to find a difference.
- Confirm you are comparing statement closing balance to software balance on the same date.
- Write down the exact difference and check its shape against the table above.
- List uncleared items and see whether they explain it.
- Search the exact amount in both places, then sort the period by amount in both and scan for a value present in one and not the other. Most differences are one findable transaction.
- Check that the previous period reconciled, because differences carry forward.
- Check the opening balance if the gap is constant across every period.
- Review the audit log for edits to reconciled items.
If the difference survives all seven, stop plugging and get an accountant to look. A gap rounded away with a balancing entry does not disappear — it moves into a figure you will later rely on for tax, for lending, or for a decision about the business.
How to stop it coming back
Reconcile monthly rather than annually: a month of transactions is findable, a year is a project. Lock closed periods. Pick one entry route — feed or manual — and stick to it. Set rules for recurring charges so fees and subscriptions code themselves. Keep business and personal money in separate accounts with separate cards. And record processor payouts as gross sales plus fees, never as one net line.
This is not bureaucracy for its own sake. Every figure you use to run the business sits on these two numbers agreeing — and when they disagree, the cash question underneath is usually the one worth answering, which is where profitable but broke picks up.
FAQ
Is a difference always an error?
No. Timing differences — payments and deposits that have not cleared — are normal, and reconciling is how you account for them. It is an error only when the gap cannot be explained by identified uncleared items.
Should I just post an adjustment to make it balance?
Only as a last resort, for a trivial amount, and only after documenting what you tried. A balancing entry does not remove the mistake; it hides it in a number you will rely on later.
Does this affect my profit figure or only the bank balance?
Both. Misclassified transfers, unrecorded fees, and personal spending posted as business expenses all change profit as well as cash — which is why fixing them properly beats making the balance agree.
When should I call an accountant?
When the difference is material, spans more than one closed period, or survives the list. Tax, entity and compliance decisions in particular belong with a qualified professional rather than a reconciliation guess.
Find the number first, read its shape, then work the causes in order. That sequence turns an afternoon of scrolling into a twenty-minute job and leaves you with books you can make decisions from. More plain-English finance guides at SortProfit.
