Bank Reconciliation Best Practices for Nigerian Businesses

Bank reconciliation is the process of matching your accounting records to your bank statement. It's one of the most important controls in your accounting system, helping you catch errors, detect fraud, and ensure your cash records are accurate. This guide explains how to do it properly.

Why Bank Reconciliation Matters

The Purpose

Bank reconciliation verifies that:

• Your records match the bank's records
• All transactions are captured
• No unauthorized transactions occurred
• Cash balance is correct

What It Catches

Issue	Detection Through
Recording errors	Amounts don't match
Missing transactions	Items on statement but not in books
Bank errors	Items in books but not on statement
Fraud/theft	Unexplained transactions
Timing differences	Cheques/deposits in transit

Understanding the Reconciliation Process

Why Balances Differ

Your book balance and bank balance often differ due to:

Timing Differences:

Item	In Your Books	At Bank
Cheques issued	Recorded immediately	Clears later
Deposits in transit	Recorded immediately	Credits later
Standing orders	May be recorded differently	Deducted automatically

Bank Items Not Yet Recorded:

Item	Status
Bank charges	On statement, not in books
Interest	On statement, not in books
Direct debits	On statement, not in books
Returned cheques	On statement, not in books

Book Items Not on Statement:

Item	Status
Outstanding cheques	In books, not yet cleared
Deposits in transit	In books, not yet credited

Step-by-Step Reconciliation

Step 1: Obtain Documents

Gather:

• Bank statement for the period
• Your cash/bank ledger
• Previous reconciliation
• Cheque book stubs
• Deposit slips

Step 2: Compare Opening Balances

Source	Opening Balance
Bank statement	₦1,500,000
Your books	₦1,500,000
Difference	₦0 ✓

If different, reconcile previous period first.

Step 3: Match Transactions

Go through each transaction:

Bank Statement:

Date	Description	Debit	Credit	Balance
Jan 1	Opening	1,500,000
Jan 5	Deposit	500,000	2,000,000
Jan 8	Cheque 1001	200,000	1,800,000
Jan 15	Transfer In	300,000	2,100,000
Jan 20	Bank charges	5,000	2,095,000
Jan 25	Cheque 1002	150,000	1,945,000
Jan 31	Interest	2,000	1,947,000

Your Cash Book:

Date	Description	Debit	Credit	Balance
Jan 1	Opening	1,500,000
Jan 5	Customer A	500,000	2,000,000
Jan 7	Cheque 1001	200,000	1,800,000
Jan 15	Customer B	300,000	2,100,000
Jan 18	Cheque 1002	150,000	1,950,000
Jan 28	Cheque 1003	100,000	1,850,000
Jan 30	Customer C	200,000	2,050,000

Step 4: Identify Differences

Item	Description	Amount
Outstanding cheque	Cheque 1003 not cleared	₦100,000
Deposit in transit	Jan 30 deposit	₦200,000
Bank charges	Not recorded	₦5,000
Interest	Not recorded	₦2,000

Step 5: Prepare Reconciliation Statement

BANK RECONCILIATION
As at January 31, 2025
Balance per bank statement                     ₦1,947,000
Add: Deposits in transit Customer C (Jan 30)                            200,000
---------- 2,147,000 Less: Outstanding cheques Cheque 1003                                   (100,000)
---------- Adjusted bank balance                          2,047,000 ==========
Balance per cash book                          2,050,000
Add: Interest earned                              2,000
---------- 2,052,000 Less: Bank charges                               (5,000)
---------- Adjusted book balance                          2,047,000 ==========
RECONCILED ✓

Step 6: Make Adjusting Entries

Record items from bank statement not in your books:

Bank Charges:

Account	Debit	Credit
Bank Charges Expense	₦5,000
Cash at Bank	₦5,000

Interest Earned:

Account	Debit	Credit
Cash at Bank	₦2,000
Interest Income	₦2,000

Step 7: Verify and File

• Check the reconciliation balances match
• Sign and date the reconciliation
• File with supporting documents
• Follow up on old outstanding items

Common Reconciliation Issues

Issue 1: Uncleared Cheques

Old outstanding cheques:

• Investigate why not cleared
• Contact payee
• Consider stop payment and reissue
• Eventually write back if stale

Issue 2: Unidentified Deposits

Unknown credits on statement:

• Check with bank for details
• Review customer records
• Could be refunds, reversals, or errors

Issue 3: Duplicate Entries

Same transaction recorded twice:

• Review source documents
• Void duplicate entry
• Strengthen entry controls

Issue 4: Transposition Errors

Numbers reversed (e.g., ₦540 vs ₦450):

• Difference divisible by 9
• Check recent entries
• Compare to source documents

Issue 5: Bank Errors

Bank's mistake:

• Contact bank immediately
• Request correction
• Track until resolved

Best Practices

Frequency

Business Size	Recommended Frequency
Small	Monthly (minimum)
Medium	Weekly
Large	Daily
High volume	Daily

Timing

Reconcile promptly:

• As soon as statement received
• Within first week of new month
• Don't let reconciliations stack up

Segregation of Duties

Where possible:

• Person who records transactions ≠ person who reconciles
• Reduces fraud risk
• Provides independent check

Documentation

Keep organized records:

• Signed reconciliations
• Supporting schedules
• Investigation notes
• Resolution documentation

Review and Approval

Have reconciliations reviewed:

• Manager or owner reviews
• Investigates unusual items
• Signs off on reconciliation

Managing Multiple Bank Accounts

Reconcile Each Separately

For businesses with multiple accounts:

• Naira operating account
• USD account
• Savings account
• Petty cash

Each needs its own reconciliation.

Interbank Transfers

When reconciling transfers between your accounts:

• Record as transfer, not income/expense
• May appear in transit between accounts
• Match on both reconciliations

How Finora Simplifies Bank Reconciliation

Bank Feed Integration

Connect your bank accounts:

• Automatic transaction import
• Daily updates
• All accounts in one place

Matching Automation

Finora helps match transactions:

• Auto-match identical amounts
• Suggest matches for review
• Flag unmatched items

Reconciliation Workflow

Guided reconciliation process:

• See bank and book transactions side by side
• Match with one click
• Add missing transactions easily

Outstanding Item Tracking

Track items in transit:

• Outstanding cheques list
• Deposits in transit
• Aging of uncleared items

Reconciliation Reports

Generate documentation:

• Reconciliation statement
• Outstanding items list
• Historical reconciliations

Frequently Asked Questions

How often should I reconcile?

At minimum, monthly. Weekly is better for active accounts. High-volume businesses should reconcile daily.

What if I can't find a difference?

Systematically review: check additions, compare item by item, look for transpositions. If small, may need to write off as adjustment (with proper approval).

Should I reconcile petty cash?

Yes. Count petty cash and reconcile to the petty cash ledger regularly.

What about online banking transactions?

Include all transactions regardless of how they originated—online transfers, POS, bank charges, etc.

How long should I keep reconciliations?

At least 6 years, aligned with your record retention policy.

Conclusion

Bank reconciliation is essential for:

• Accurate cash records
• Error detection
• Fraud prevention
• Financial control

Make it a regular practice:

• Reconcile monthly at minimum
• Investigate all differences
• Make timely adjustments
• Keep proper documentation

Finora streamlines bank reconciliation with bank feeds, automatic matching, and guided workflows—making what was once tedious quick and accurate.

---

Want easier bank reconciliation?

Get started for free and let Finora's bank integration and matching tools simplify your reconciliation process.

Try Finora Free →