The short version
- A bank reconciliation proves that your books and your bank agree, line by line, as of the statement date.
- Differences almost always come from timing (deposits in transit, uncleared checks) or from items the bank recorded that you have not (fees, returned payments).
- Reconcile every bank account monthly, including the security deposit account, within a week or two of the statement.
- Never force a reconciliation to balance with a plug entry. Find the actual cause.
- Bank feeds and matching make the job much faster, but you still need to review and finish the reconciliation.
A bank reconciliation is the single most useful check in rental bookkeeping. It answers a simple question: do my books agree with the bank? If they do, you can trust your reports, your owner statements and your tax numbers. If they do not, you find out now, while the details are fresh, instead of at tax time.
The process takes 15 to 30 minutes a month per account once you have done it a couple of times. Here is how it works, with a full worked example.
What reconciliation actually compares
Your bank statement shows what has cleared the bank as of the statement date. Your books show everything you have recorded, including things that have not cleared yet. Reconciliation explains the difference between the two.
Differences fall into two groups:
Timing differences, which fix themselves:
- Deposits in transit. Rent you recorded and deposited that the bank had not processed by the statement date.
- Outstanding checks. Checks you wrote and recorded that the payee has not cashed yet.
Items the bank knows about and you do not, which you need to record:
- Bank service fees and wire fees
- Interest earned
- Returned payments (bounced checks or failed ACH)
- Automatic payments you forgot to enter
And occasionally, errors: a transaction entered twice, an amount typed wrong, or a payment posted to the wrong bank account.
Before you start
Have these ready:
- The bank statement for the month, with the ending balance
- Last month’s finished reconciliation, so you know the starting point
- Your books brought up to date for the month: rent posted, bills entered, transfers recorded
If you use a bank feed, accept or match the pending lines first. That clears most of the routine work before the reconciliation itself.
The worked example
Here is the operating account for a small portfolio at the end of September.
From the bank statement:
- Ending balance on September 30: $24,350
From the books:
- Book balance on September 30 before reconciling: $26,235
The two numbers are $1,885 apart. Here is how to find out why.
Step 1: Tick off what cleared
Go through the statement line by line. For each deposit and withdrawal, find the matching entry in your books and mark it cleared. Anything on the statement that is not in your books goes on one list. Anything in your books that is not on the statement goes on another.
After ticking, you find:
| In the books, not on the statement | Amount |
|---|---|
| Rent deposit made September 30 (Units 2 and 5) | $1,900 |
| Check 1042 to the plumber | ($850) |
| Check 1043 to the landscaper | ($400) |
| On the statement, not in the books | Amount |
|---|---|
| Returned ACH payment, Unit 3B rent | ($1,200) |
| Monthly account fee | ($35) |
Step 2: Adjust the bank balance for timing
Start with the statement’s ending balance and add or subtract the timing items:
| Item | Amount |
|---|---|
| Bank statement ending balance | $24,350 |
| Add deposits in transit | $1,900 |
| Less outstanding checks ($850 + $400) | ($1,250) |
| Adjusted bank balance | $25,000 |
Step 3: Adjust the book balance for items you missed
Start with the book balance and record what the bank knew about:
| Item | Amount |
|---|---|
| Book balance before reconciling | $26,235 |
| Less returned payment, Unit 3B | ($1,200) |
| Less account fee | ($35) |
| Adjusted book balance | $25,000 |
Step 4: Confirm they match
Adjusted bank balance: $25,000. Adjusted book balance: $25,000. The difference is $0.00, and the reconciliation is done.
Now record the two missing items in your books for real. The returned payment goes back on the Unit 3B tenant’s ledger as an open charge, so rent reminders and late fees pick it up. The fee goes to bank charges. Our guide to returned rent payments covers what to do with the tenant.
When it does not balance
If the difference is not zero, work through this list:
- Did you start from the right place? The beginning balance should match last month’s reconciled ending balance.
- Is a transaction entered twice? Common with bank feeds if someone also entered it by hand.
- Are digits transposed? A difference divisible by 9, such as $54 or $270, often means two digits swapped.
- Is something in the wrong account? A security deposit recorded in the operating account, or a bill paid from the wrong bank.
- Was a prior month changed? Editing a transaction that was already reconciled will throw off the next one.
Resist the urge to post a small “reconciliation adjustment” to make it balance. Plugs hide errors, and errors grow.
Reconcile every account
Most landlords reconcile the operating account and forget the rest. Reconcile all of them:
- Operating account: rent in, bills out.
- Security deposit account: the balance should equal total deposits held on your balance sheet. See how to account for security deposits.
- Credit cards used for the rentals: confirm every charge is categorized and assigned to a property.
- Reserve or savings accounts, if you keep them separately.
Property managers holding owner and tenant funds should check their state’s trust account rules, which often require monthly reconciliation and record retention. The definition page on trust accounts covers the basics.
How software shortens the job
The slow parts of reconciliation are getting the transactions into your books and matching them. Both can be largely automated:
- Bank feeds bring new lines in daily, so your books are already current when the statement arrives.
- Matching pairs bank lines with payments and bills you already recorded. One bank deposit can be matched to several rent payments at once.
- Bank rules sort recurring lines like utilities and insurance into the right account as they arrive.
In TenantLoop, bank sync through Plaid brings in lines from your operating, deposit and credit card accounts, or you can upload a CSV statement. When you reconcile, you enter the ending balance, tick what cleared until the difference reads $0.00, and save. You can save a draft and finish later, and every finished reconciliation is kept as a PDF.
Monthly reconciliation checklist
- Bring the books up to date for the month
- Accept or match bank feed lines
- Open the statement and enter the ending balance
- Tick every cleared deposit and withdrawal
- List deposits in transit and outstanding checks
- Record fees, interest and returned payments you missed
- Confirm the difference is $0.00
- Save the reconciliation report
- Repeat for the deposit account, credit cards and reserves
- Follow up on any check outstanding for more than 60 to 90 days
For the rest of the monthly routine, see a monthly bookkeeping routine for landlords.
Before you try it on a tenant.
How often should landlords reconcile their bank accounts?
Monthly, for every account, including operating, security deposit and any credit card used for the rentals. Property managers holding client funds may be required by state rules to reconcile trust accounts monthly and keep the reports.
What if my reconciliation is off by a small amount?
Look for a transposed number, a fee you have not recorded, or a transaction entered twice. A difference divisible by 9 often points to transposed digits. Do not adjust it away without finding the cause.
Is a bank feed the same as reconciling?
No. A bank feed brings transactions into your books automatically. Reconciliation is the separate step of confirming that the cleared balance in your books matches the bank statement's ending balance.
Do I need to reconcile the security deposit account too?
Yes. The balance in that account should match the total security deposits you hold as a liability. A mismatch can mean a deposit was put in the wrong account or a refund was not recorded.