Bank reconciliation compares your bank statement with your own ledger line by line until the two balances agree, apart from items in transit. Do it at least monthly, list unmatched items, and chase overdue invoices from the same exercise, so that cash, debtors and VAT figures stay reliable.
Your ledger records what you think happened; the bank statement records what the bank processed. Reconciling them proves that every receipt and payment is recorded once, in the right amount and the right period, and exposes errors, duplicate payments and unauthorised withdrawals.
It also supports tax and audit. Auditors usually start from the bank reconciliation at year end, and KRA reviewers compare deposits with declared sales. An account with unexplained credits invites uncomfortable questions about undeclared revenue.
Finally, it tells you your real cash position. A cheque you issued last week may not have cleared, and a customer's transfer may have arrived yesterday without anyone noticing. The reconciled balance is the one to use for decisions.
It is also your first line of defence against fraud. Altered payee names, repeated small payments to unknown accounts and cheques cashed twice all appear as odd items in the reconciliation, and a monthly review by someone independent catches them while recovery is still possible.
Start with the closing balance on the statement and the closing balance in your ledger for the same date. Tick off each statement line against a ledger entry. Remaining ledger items are normally timing differences, such as cheques not yet presented or deposits in transit.
Remaining statement items need action in the ledger: bank charges, interest, direct debits, standing orders and returned cheques. Book them with a clear description and a reference to the statement date, and attach any bank advice you hold.
Finish with a short schedule showing statement balance, plus deposits in transit, minus outstanding payments, equals ledger balance. Have someone other than the person who processes payments review and sign it, which is a basic control that many small businesses skip.
Kenyan businesses receive money by bank transfer through RTGS and EFT, by PesaLink, by cheque, by card settlements and via mobile money settled into the account. Each channel names the payer differently and settles at a different time, so the same customer can appear under three descriptions.
Cheques bring their own risks: post-dated cheques, bounced cheques and delays in clearing. Record a cheque when it is deposited, but treat the invoice as settled only when funds clear, and keep the returned-cheque notice if one bounces.
Card and mobile settlements are usually paid net of fees and sometimes bundled across several days. Ask the provider for settlement reports so that you can break a single bank credit into the underlying sales and the deducted charges.
Standing orders and direct debits deserve a periodic review. Subscriptions that were cancelled in the contract but keep running at the bank show up as small repeated charges, and a quarterly look at recurring items can recover a surprising amount.
Ask customers to quote the invoice number in the payment reference. Where they do not, match by amount and payer name, and write the invoice number on your bank schedule so that the link is visible. Grouped payments should be allocated on paper line by line.
Short payments, caused by withholding tax, bank charges or disputes, leave small balances open. Decide a policy: for example, request a withholding certificate for withheld amounts, or write off immaterial differences with approval. Without a policy, those residuals pile up.
Foreign-currency receipts require the exchange rate used by the bank on the credit date. Record the shilling value received and the difference against the invoice as an exchange gain or loss, and ask your accountant to confirm the accounting treatment.
Dispute handling belongs here too. When a customer says they have paid, ask for the bank reference or a screenshot of the transfer, look for it on your statement, and allow for a delay between initiation and credit. Resolving it from evidence prevents both double-charging and the loss of genuinely unpaid sums.
Once receipts are matched, the unpaid invoices left over are your overdue list. Sort by age and amount, and contact the largest and oldest first. A short polite message with the invoice number, amount and payment details often unlocks a payment that was simply forgotten.
Keep a log of each contact: date, person spoken to, promise made. If a customer repeatedly misses promised dates, escalate to a manager or agree a payment plan in writing. Stop extending new credit to accounts that are already well overdue.
Review the list weekly rather than monthly. A debt that is thirty days old is far easier to collect than one that is ninety, and sales staff can often resolve problems the accounts team cannot see.
Separate genuine disputes from slow payers. An invoice contested because goods were damaged needs a credit note or a replacement, not another reminder. Tagging disputed items prevents your collection effort from irritating customers who are waiting on you.
4invoices.net keeps the PDF archive of issued invoices, which is the list you match statement lines against. It does not import bank statements or match payments automatically, so the reconciliation is manual or performed in your accountant's system.
Use 4notify.net to send SMS or e-mail reminders to overdue customers when you choose. It sends the messages you write; it does not generate an ageing report or schedule reminders, so keep your own overdue list.
For multi-entity groups, 4softerp.net can hold the financial records of each company separately, which makes it easier to see which entity owns which bank account. Reconciliation still follows the same discipline: statement, ledger, schedule and review.
Whatever format you use, lock each month after review. Once the reconciliation is signed, changes to that period should require a documented adjustment in the current month, which stops silent edits to closed figures and keeps the audit trail intact.
Manually matching bank statement lines to invoices takes several hours every week, and unmatched items accumulate.
Match statement lines to open invoices manually, with the 4invoices.net archive as your list of outstanding invoices. 4b2b does not import bank statements or match payments automatically.
Overdue debtors are not chased consistently, stretching the average time to collect.
Review overdue invoices regularly and send reminders by SMS or e-mail from your 4notify.net account. 4b2b does not produce an ageing report or send reminders on a schedule.
Short payments caused by withholding tax or bank charges leave small balances open forever.
Agree a write-off and certificate policy with your accountant and apply it yourself. 4b2b does not allocate residual balances.
Monthly is the minimum for any business, and weekly or even daily works better when you handle many transactions. Frequent reconciliation keeps unmatched items short and makes errors easy to trace. Always complete a full reconciliation before preparing the monthly VAT and management figures. Pick a day each week and make it part of someone's defined duties.
Common causes are cheques issued but not yet cleared, deposits in transit, bank charges and interest not yet booked, direct debits you forgot, returned cheques and plain keying errors. Work through each statement line methodically, and any difference left over usually points to a duplicate or omitted entry. Write each explanation next to the item so the reviewer can follow the logic.
The person who records payments should not be the only one who reconciles them. Ask a second person, such as a manager or your accountant, to review and sign the schedule each month. That separation of duties is a simple, low-cost control against error and fraud. Small teams can swap roles monthly or ask an outside accountant to review.
Find out why: withholding tax, disputed items or bank charges. Request a withholding certificate where tax was withheld, issue a credit note for agreed disputes and follow up for the rest. Set a clear threshold under which small differences are written off with approval, and record the decision. Keep the correspondence with the invoice so that the history is obvious later.
No. 4invoices.net produces PDF invoices and keeps an archive, but it does not import bank statements or match payments automatically. Use the archive as your list of open invoices when you reconcile, and send reminders yourself from 4notify.net by SMS or e-mail. Mark each invoice paid in your own records once you have matched the receipt.
This page is informational. Confirm requirements with the competent authority; 4b2b tools cover general invoicing and records only.
