Bank reconciliation for sole traders: a monthly routine that takes twenty minutes
Reconciliation sounds like an accountant’s word, but the idea is simple. Your bank statement is the official record of what went in and out of your account. Your books are your own account of what those movements were for. Reconciling is lining the two up so nothing is missing, double counted or misdescribed. Done monthly, it catches errors while you can still remember the story behind them. Done once a year, it is a puzzle. This guide gives a routine that suits a sole trader without a bookkeeper.
Updated 5 October 2026. General information only, not tax advice.
Why the statement is the record that matters
A bank statement is produced by a third party, can be downloaded for years back, and is hard to dispute. The ATO treats it as strong evidence of income received and money spent. Receipts and invoices explain what each line was, but the statement shows that it happened. If you work from the statement first, your books cover everything that touched the account. See sole trader bookkeeping basics.
Step one: get the month’s statement
Download the statement or a CSV export at the start of each month for the month just ended. If you have several accounts, such as a business account, a credit card and a PayPal or Stripe balance, download each. See how to export a bank statement as CSV.
Step two: match every line
Go down the statement line by line and tick it against your books. Each line should fall into one of these groups:
- income from a customer, matched to an invoice
- a business expense, matched to a receipt or tax invoice
- a transfer between your own accounts, which is neither income nor an expense
- a private payment or drawing
- a payment you do not recognise
The last group is the one to chase. Check the merchant name, the date and your calendar, and if you still cannot place it, treat it as private until you can show otherwise.
Step three: check the closing balance
Start with the opening balance on the statement, add the money in and subtract the money out. You should arrive at the closing balance. If your records show a different figure, something has been missed, entered twice or entered with the wrong amount. Fix the biggest differences first; small ones often disappear once a large item is found.
Handling transfers, card payments and platform payouts
A transfer from savings to the business account is not income. A credit card payment is not a second expense, because the purchases have already been counted on the card statement. A Stripe, Square or PayPal payout is usually the sales total minus fees, so the deposit is lower than your sales. Record the gross sales and the fees separately and the payout will reconcile. See payment processor fees and GST.
Mixed personal and business accounts
If you use one account for everything, reconciliation matters more, because every line must be sorted into business or private. A separate business account makes the job quicker and the records cleaner, and it is not required by law. If you stay with one, mark private lines as you go instead of at the end.
What to do about missing receipts
Ask the supplier to reissue the invoice, check your email and the supplier’s portal, and note the details for the ATO if you cannot find it. A bank line is evidence of payment but not of what you bought, so write a note on each. See lost receipts: what you can still claim.
Making it a habit
Pick a fixed day, such as the first Monday of the month, and set a recurring reminder. Reconcile before you lodge any BAS, and again at the end of the financial year. Twenty minutes monthly is realistic if you do it regularly. If it has been months, start with the latest month and work backwards.
How FlowFi helps
FlowFi takes your statement and sorts every line into a category with the GST worked out, flags the ones it is unsure about, and shows a total you can compare to your closing balance. You still decide what each flagged line was.
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Frequently asked questions
Do I have to reconcile if my accountant does my tax return?
It is a good idea. Your accountant relies on the records you give them, and reconciled records make for a faster and cheaper return. Errors found at tax time can also affect BAS lodged earlier in the year.
What if the numbers will not reconcile?
Look for duplicates, transfers entered as income, and sign errors first. If a small difference remains, note it and move on. Do not invent an entry to force a match.
How far back do I need to reconcile?
Records generally need to be kept for five years. In practice, aim to reconcile at least every BAS period, and fix older gaps when you find them.
General information only, not tax advice. Check your own situation with a registered tax agent or the ATO.
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