Bank reconciliation for small businesses: what it is and how to do it

What bank reconciliation is

It's the process of comparing your bank account's transactions with your records (issued and received invoices, expenses, payroll) so every transaction has supporting paperwork and every invoice has its payment. The aim is for your bank balance and your books to agree and, when they don't, to know exactly why.

For a small business, the part that matters most day to day is incoming payments: knowing which client invoices have really been paid.

How often to reconcile

The more often, the easier: with few transactions, each one is recognisable at a glance. Weekly works for most small businesses; if you take many payments a day (ecommerce, clinics), daily or automatic is better. Monthly is the reasonable minimum, before your accountant prepares the quarter's taxes.

How to do it step by step

If you do it by hand with a spreadsheet or your invoicing software:

• 1. Download the period's transactions from online banking (or use the ones your software already imports).
• 2. List issued invoices awaiting payment and received invoices you still owe.
• 3. Match on exact amount first: it's the most reliable signal.
• 4. Confirm with the reference or payer name: invoice number, client name.
• 5. Mark each reconciled invoice as paid.
• 6. Review what's left: transactions with no invoice (fees, subscriptions, unexplained payments) and invoices with no transaction (genuinely unpaid).
• 7. Check the bank's closing balance matches your records.

The tricky cases (and what to do)

Almost every headache comes from one of these:

• Bundled payments: one transfer covers several invoices. Look for invoice combinations that add up to the amount.
• Partial payments: note the remaining balance and chase the difference.
• Bank fees: the amount arrives slightly short. Record the fee as an expense.
• Different payer: a parent company or an agency pays. Note the link for next time.
• Empty references: ask clients to include the invoice number in the transfer.

Make reconciliation easier from the start

Ask on every invoice for the invoice number to be used as the transfer reference, keep a bank account just for the business, number invoices sequentially and simply, and record recurring expenses (subscriptions, software, rent) once so you recognise them instantly. Small habits like these turn reconciliation from detective work into a quick tick-through.

How Tessa automates it

With your bank connected read-only via PSD2 and Holded connected, Tessa matches each incoming transfer with pending invoices: same amount, a date on or after the invoice, and the invoice number or client name in the payer or reference. Each transfer and each invoice is used only once, so nothing is double-counted.

Matches reach admins as suggestions (“this transfer looks like invoice F2026-031: shall I mark it paid?”) and are confirmed in one click in Finance. Bank access lasts 90 days and Tessa reminds you before it expires. Transactions are kept for up to 13 months and deleted if you disconnect the bank.