--- title: "Understanding Bank Reconciliation" canonical: "https://kb.myframeworks.com.au/space/FRAM/419102721/Understanding%20Bank%20Reconciliation" format: markdown --- Bank reconciliation is the process of matching transactions recorded in your General Ledger cash account with entries on your bank statement to verify that your financial records accurately reflect actual bank account activity. The **Bank Reconciliation module** within Frameworks allows you to investigate any discrepancies and adjust journals to ensure your Bank Statement and the General Ledger records match. Regular bank reconciliation maintains financial integrity by uncovering unusual transactions that may indicate fraud, catching data entry mistakes before they compound, and revealing operational inefficiencies such as duplicate payments or missing deposits. For construction businesses managing large project payments, supplier transactions, and customer deposits, bank reconciliation provides critical oversight of cash flow accuracy. ## Use Case > **Example:** ABC Timber completes their monthly bank reconciliation for September. The accounts team obtains the bank statement showing a closing balance of $45,230. The General Ledger cash account shows $46,100. > > During reconciliation, the accounts team identifies: > > - Three customer payments totalling $2,500 deposited on September 30 that appear on the bank statement but weren't entered in the system > - A $750 bank fee for merchant services that appears on the statement but isn't recorded in the GL > - Two supplier payments totalling $3,620 that were recorded in the GL on September 29 but won't clear the bank until October 2 > > The accounts team creates customer payment entries for the $2,500 in deposits and a journal entry for the $750 bank fee. After matching all transactions and accounting for the outstanding supplier payments, the reconciliation confirms that the GL balance correctly reflects the business's cash position. The reconciliation is marked complete and locked, establishing September's verified financial position. ## How Bank Reconciliation Works Frameworks provides flexibility in bank reconciliation by offering two methods for bank reconciliation depending on your bank's capabilities and your business preferences. Both methods achieve the same outcome but differ in data entry approach. - The **Manual Bank Reconciliation **option involves a hands-on, transaction-by-transaction approach with a physical bank statement. - The **Statement Import** **Bank Reconciliation **option automates the process through digital statement imports for greater efficiency. Users can choose the method that best suits their preferences and needs. ## Manual Bank Reconciliation The **Manual Bank Reconciliation** process allows you to reconcile bank transactions using a printed or physical bank statement. You'll need to manually compare each transaction listed in the printed bank statement with those recorded in the general ledger's cash account. Using the manual option, you'll mark off items for each transaction as they are verified to match. From the [reconciliation screen](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28380750), you can create adjustments, such as journal entries or add any customer payments that may not have been entered yet. The **Manual Bank Reconciliation **method provides a hands-on approach to reconciliation and allows for a detailed review of individual transactions. This method is suitable for users who prefer working with physical documents or have limited export capabilities from their bank. ## Statement Import Bank Reconciliation The **Statement Import Bank Reconciliation **process allows you import electronic bank statement files directly into Frameworks. Frameworks can automatically suggest matches between imported statement transactions and General Ledger entries based on amount, date, and reference number. This automated approach saves time and reduces manual data entry errors. > ⚠️ File import reconciliation requires the **BNK (Electronic Banking) feature code** to be activated. Both methods access the same General Ledger cash account, create identical adjustment entries, and produce equivalent reconciliation results. Frameworks tracks all matched transactions, unreconciled items, and adjustment entries created during reconciliation. Once marked complete, reconciliations are locked to preserve audit trails. ## What Occurs During Bank Reconciliation When you create a bank reconciliation, Frameworks retrieves all General Ledger transactions posted to the specified cash account for the reconciliation period. For manual reconciliations, you reference your bank statement details manually and match them against these GL transactions. For file import reconciliations, the system parses the imported bank statement file according to the configured file format (NAI/BAI, CSV, MT940, or other formats set up in Bank Reconciliation File Formats). ![image](media://909041c4-e739-4057-a3fe-42ae4e13b1f0) The matching engine compares bank statement entries with unreconciled GL transactions. Matching considers transaction amounts (including reversed signs for debits/credits), dates within tolerance windows, and reference numbers or cheque numbers. When matches are found, the system presents suggestions that you can accept or reject. Transactions you manually select as matching are immediately marked as reconciled in both the bank statement and GL records. Unmatched bank statement entries require investigation. Bank fees, interest charges, or other bank-initiated transactions need journal entries to record them in the GL. Customer payments appearing on the statement but not in the system need payment entries created and allocated to customer invoices. The system provides screens to create these adjusting entries without leaving the reconciliation process. The reconciliation remains open until you manually mark it complete. At completion, the system verifies that the adjusted GL balance equals the bank statement balance. If balances don't match, completion is prevented until discrepancies are resolved. Completed reconciliations are locked permanently, ensuring financial records aren't altered after verification. ## Process Stages > Macro (include) Bank reconciliation follows these stages regardless of method: 1. **Statement Preparation** - Obtain your bank statement (paper copy or electronic file) and ensure the GL period is open for the statement date. 2. **Reconciliation Creation** - Create a new bank reconciliation in Frameworks, either by manually entering statement details or importing a bank statement file. 3. **Transaction Matching** - Match bank statement entries with GL transactions. This can be done manually by selecting matching entries or using automated suggestions in file import reconciliations. 4. **Discrepancy Resolution** - For unmatched items, create journal entries for bank fees or errors, or create customer payments for receipts not yet in the system. 5. **Finalisation** - Review all matches, confirm the GL balance equals the statement balance, and mark the reconciliation as complete. This locks the reconciliation and cannot be reversed. Unreconciled items automatically carry forward to the next period's reconciliation, ensuring no transactions are overlooked until properly matched or resolved. --- ## Related Information [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28380798](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28380798) [https://sterlandsupport.atlassian.net/wiki/spaces/CO/pages/30529362](https://sterlandsupport.atlassian.net/wiki/spaces/CO/pages/30529362) [https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28408698](https://sterlandsupport.atlassian.net/wiki/spaces/FRAM/pages/28408698)