Bank Reconciliation for AR Checklist
Bank reconciliation from an accounts-receivable angle proves that the money you banked matches the receipts you applied. This checklist ties the bank, the cash applied and the ledger together.
What this checklist covers
- Agree banked receipts to cash applied in the ledger
- Identify timing items between the bank and the books
- Separate AR receipts from non-AR deposits
- Resolve fees, reversals and dishonoured payments
- Document the reconciliation for review and audit
7 min
Before you start
An AR-focused bank reconciliation needs the bank data complete and the cash already applied. Pull both for the same period before you begin.
- Download the full bank statement and any card or gateway settlement reports for the period.
- Confirm cash application is complete so applied receipts can be matched to deposits.
- Have the prior reconciliation ready to clear last period's outstanding items.
- Know which deposits are not AR — loans, refunds in, owner funds — so they are excluded.
Step 1 — Match deposits to applied receipts
- Work down the bank statement and tick each AR deposit against the receipt applied in the ledger.
- Confirm batch deposits agree to the sum of the individual receipts applied.
- Set aside non-AR deposits to be accounted for elsewhere.
- Note any deposit in the bank with no matching applied receipt — likely unapplied cash.
Step 2 — Account for timing and adjustments
- Deposits in transit: receipts applied in the books but not yet showing in the bank.
- Bank fees and merchant charges: in the bank but not yet in the ledger — post them.
- Dishonoured or reversed payments: reverse the receipt and reopen the invoice.
- Gateway hold-backs: reconcile gross sales against net payout plus fees and reserves.
Step 3 — Reconcile and sign off
- Build the reconciliation: book balance, add and subtract timing items, agree to the bank balance.
- Confirm the closing AR cash applied is consistent with the deposits reconciled.
- Clear last period's reconciling items and explain any that remain.
- Have the reconciliation reviewed and signed for the period.
A reversed or dishonoured payment reopens a debt that may need chasing again. Once it is clearly owed, a free debt appraisal tells you whether to escalate, and our free tools help you re-issue terms.
Common mistakes
- Mixing AR and non-AR deposits. Loans or refunds counted as receipts overstate cash applied.
- Ignoring merchant fees and reserves. Reconciling net payouts without grossing up understates AR.
- Not reversing dishonours. A bounced payment left applied shows a paid invoice that is actually still owed.
- Carrying stale timing items. A deposit in transit that never clears is usually an error, not timing.
Key takeaways
- Bank reconciliation proves banked receipts match cash applied to AR
- Separate AR deposits from loans, refunds and other non-AR money
- Account for fees, reserves, dishonours and deposits in transit
- A dishonoured payment must reverse the receipt and reopen the invoice
Frequently asked questions
What is a deposit in transit?
It is a receipt you have recorded and applied in your books but which has not yet appeared on the bank statement, often because of a cut-off or clearing delay. It is a legitimate reconciling item — but one that never clears usually signals an error rather than timing.
How do I reconcile a payment gateway that holds back funds?
Reconcile gross sales to the net payout plus fees plus any reserve or hold-back the gateway retains. Posting only the net amount to AR understates what customers actually paid and leaves residue on invoices. Keep the settlement report as your evidence.
What happens to AR when a payment dishonours?
Reverse the receipt so the cash is no longer treated as banked, which reopens the original invoice as outstanding. The customer then owes the amount again, and you may also recover any dishonour fee your terms allow.
Work the checklist, then get paid
Use the free Invoice Generator, then let Merion recover anything that goes unpaid — commission-only.