How to reconcile a statement in four steps

Reconciliation is a small, ordered job rather than a re-adding of the whole column. Four steps take about fifteen minutes on a month of five hundred lines, and each step rules out one of the four causes before the arithmetic is ever questioned.

Desk spec

steps: 4
lines checked: 500
time taken: 15 minutes
gap found: 12.00

the lineOne transaction, with a date, a type, an amount and a running balance. The sample month holds 240 of them, and every one belongs to a category.

the running balanceThe balance after each line, in the statement's own order. It is not the balance you can withdraw, because a bonus credit sits inside it: 312.00 shown against 292.00 settled.

the pending lineA line that has been recorded but not settled. Of 500 lines in the sample, 43 were pending and 21 were reversed, against 436 settled.

Direct answer

Reconciliation runs in four steps: check the running balance against the amounts, check the states of the last few lines, separate the cash from the shown balance, and look for pairs. On the samples that finds a 12.00 gap across 500 lines in about fifteen minutes, traced to a single pending line.

The four steps

The order matters, because each step is cheaper than the one after it and each rules out a cause. The last step - re-adding the column - is the only one that questions the arithmetic, and on the samples it is almost never the answer.

Sample J - the four steps and what each rules out
Step	What it does	Rules out
1 the running balance	checks each amount against the two balances beside it	a transcription error
2 the states	reads the last few lines for a pending or reversed flag	a pending line
3 the cash	subtracts any bonus credit from the shown balance	a bonus line
4 the pairs	searches both directions for a matching amount	a reversal, or a line from another product
four steps	one gap, one cause	the arithmetic is never doubted first

sample J - the four steps, timed step 1 the running balance < 5 minutes step 2 the states < 2 minutes step 3 the cash split < 1 minute step 4 the pairs < 7 minutes total = 15 minutes for a month of 500 lines and the gap the four steps find: the shown balance = 312.00 the cash the reader expected = 292.00 the gap = 312.00 - 292.00 = 12.00 on this statement traced in step 2 to one pending line of 12.00 that had not settled.

What the steps assume, and what to do when they fail

The steps assume the statement is complete and the balance is current. When all four are exhausted and the gap remains, the next move is the export rather than the arithmetic, so the two records can be compared line by line outside the screen.

samples J, B and F - the steps against the causes of the four causes (sample C: 200 disagreements): a pending line 37.0% -> found in step 2 a bonus line 29.0% -> found in step 3 another product 20.5% -> found in step 4 a reversal 13.5% -> found in step 4 so steps 2 and 3 answer 66.0% of disagreements in under three minutes, and step 4 answers the remaining 34.0%: and when nothing is found, an export exists for 79 / 100 accounts (sample F), which is the tool for the last case rather than a re-add.

Reconcile in this order

Start at the last line and work back, since recent lines are the unfinished ones.
Do the running-balance check on the amounts you can see, before re-adding anything.
Honour a pending flag, and give a recent line a day before treating it as settled.
Subtract the bonus before comparing the balance with the cash you expect.
Compare the export line by line only when all four steps have failed.

How to reconcile a statement in four steps

The four steps

What the steps assume, and what to do when they fail

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