Key takeaways
- Bank reconciliation matches a business's own cash records with its bank statements and explains every difference.
- Payment companies run many accounts across several banks and currencies, with transaction volumes far above a normal business.
- Banks deliver statements in standard electronic formats such as MT940 and camt.053, which allow daily automated matching.
- The reconciliation should run per account, per currency, every day, with differences aged and owned.
What bank reconciliation is
Bank reconciliation is the check that a business's record of each bank account agrees with the bank's own statement. For most businesses it is a monthly accounting task covering a few hundred transactions. For a payment company it is a daily operational control covering tens or hundreds of thousands of transactions across dozens of accounts.
Payment companies also tend to hold accounts at several banks, for resilience and for local payment access, and each bank delivers statements at different times and in different levels of detail. A reconciliation that waits for the slowest bank delays every other control that depends on it, including the daily customer-money calculation.
The difference is not only scale. A payment company's bank accounts hold customer money, operating money, settlement flows and funding for payouts, often in the same bank and sometimes in the same currency. Misallocating a receipt between two of those accounts is not a bookkeeping slip. It can change what the firm is required to hold for customers.
Statement formats
Banks deliver statements electronically in standard formats. MT940 is an older format from the SWIFT messaging network, still widely used. camt.053 is the newer ISO 20022 format, which carries more detail per transaction, including structured remittance information that makes matching easier. Many banks also offer intraday statements, MT942 or camt.052, which show balances during the day.
The matching itself works best in stages. First, match on the bank's own transaction reference. Second, match on structured remittance information, such as an end-to-end payment identifier. Third, match on amount and date within a narrow window. Anything left after the third stage is a genuine difference that needs a person to look at it.
A reliable reconciliation loads these files directly from the bank, rather than from downloaded spreadsheets, so that the figures cannot be edited before matching.
Worked example: one bank, three accounts
| Account | Company record (EUR) | Bank statement (EUR) | Difference (EUR) |
|---|---|---|---|
| Customer funds | 9,612,400.00 | 9,528,400.00 | 84,000.00 |
| Operating | 1,204,550.75 | 1,204,550.75 | 0.00 |
| Payout funding | 3,300,000.00 | 3,384,000.00 | (84,000.00) |
| Total | 14,116,950.75 | 14,116,950.75 | 0.00 |
A reconciliation done in total would have shown no difference. Only an account-by-account reconciliation finds it.
Controls that matter
Reconcile per account and per currency, never in total. Load statements directly from the bank. Match on bank references and structured remittance data before amounts. Give every difference an owner and an age. Report differences older than a set limit to the finance lead. For regulated firms, feed the reconciled balances straight into the customer-money calculation, whether that is CASS 15 safeguarding in the UK or permissible investments in the US.
Safeheld loads bank statements in MT940, camt.053 and other formats, reconciles every account and currency daily, and connects the result to each entity's regulatory position. See Safeheld reconciliation.
Frequently asked questions
What is bank reconciliation?
Matching a business's own record of each bank account with the bank's statement and explaining every difference.
How often should a payment company reconcile its bank accounts?
Daily, per account and per currency.
What is camt.053?
The ISO 20022 electronic bank statement format, which carries detailed transaction and remittance information.
Why reconcile per account rather than in total?
A total can agree while money sits in the wrong account, which for regulated firms can mean customer money is held outside a protected account.
References
- ISO 20022, Bank-to-customer cash management messages (camt)
- FCA Handbook, CASS 15.8 Records, accounts and reconciliations
About Safeheld
Safeheld reconciles client money every day, resolves every difference and prepares every regulatory return for sign-off, for regulated firms in the United States, the United Kingdom, the European Union, Canada, Australia, Singapore and Hong Kong. To discuss your operations, contact us at safeheld.com/contact.
This article is for general information and does not constitute legal or regulatory advice.