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Definition · the close

Bank reconciliation

Bank reconciliation is the practice of reconciling the cash balance per the books to the bank statement and explaining timing differences. For bank reconciliation, the useful boundary is the source cash view, timing horizon, owner, liquidity exposure, and operating decision before payment timing, runway, or financing options change.

Also known as bank rec, cash reconciliation

Written by Pluvo TeamReviewed by Pluvo Team
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Why it matters

Understanding bank reconciliation matters because cash decisions are time-sensitive. Teams need to know when money moves, which balance changes, who owns the next action, and what can still be changed before liquidity tightens. When the term is tied to a source system, owner, and review cadence, it becomes easier to audit assumptions, catch changes early, and keep operators aligned.

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In practice

  • Liquidity example

    Finance teams use bank reconciliation when they need to understand cash timing before a decision is made. A team might compare expected receipts, payroll, vendor payments, and debt obligations to decide what action is needed this week.

  • Review example

    Bank reconciliation should be reviewed whenever the source system, calculation logic, time period, or decision owner changes. That keeps the definition useful instead of letting it drift into a label.

In practice, teams should define bank reconciliation with a clear source, owner, time period, and decision before they use it in reporting, planning, or operating reviews.

Understanding bank reconciliation matters because cash decisions are time-sensitive. Teams need to know when money moves, which balance changes, who owns the next action, and what can still be changed before liquidity tightens. When the term is tied to a source system, owner, and review cadence, it becomes easier to audit assumptions, catch changes early, and keep operators aligned.

A strong workflow for bank reconciliation separates the definition from the action: first agree what the term means, then decide how it is measured, when it changes, and who is accountable for the next step.

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FAQ

What is a bank reconciliation?

Bank reconciliation is the practice of reconciling the cash balance per the books to the bank statement and explaining timing differences. For bank reconciliation, the useful boundary is the source cash view, timing horizon, owner, liquidity exposure, and operating decision before payment timing, runway, or financing options change.

What are reconciling items on a bank reconciliation?

Bank reconciliation is the practice of reconciling the cash balance per the books to the bank statement and explaining timing differences. For bank reconciliation, the useful boundary is the source cash view, timing horizon, owner, liquidity exposure, and operating decision before payment timing, runway, or financing options change. For bank reconciliation, list the categories used internally and keep them tied to the same source fields over time.

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Sources

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