Check reconciliation software compares the list of checks you issued with the checks the bank paid, and flags every difference: a check that has not cleared, a paid amount that differs, or a check paid that you never issued. A regular bank reconciliation only proves the balance, not each check.
What check reconciliation software matches: issued versus paid checks
Check reconciliation software matches two lists on check number: the issue register from your books and the paid items from the bank. Each issued check lands in one of three states: paid and agreeing, still outstanding, or paid at a different amount. Paid items with no issue record form a fourth group.
The two lists
The issue register holds the check number, date, payee and amount for every check you wrote. The paid list comes from the bank, either as a statement section or as a file, and holds the check number, paid date and paid amount. Matching on the number is the simple part. The checking is in what you compare after the number agrees: amount first, then date, then payee where the bank supplies it.
An example
The table below uses example values to show the four outcomes.
| Check # | Issued amount | Paid amount | Result |
|---|---|---|---|
| 4101 | 1,250.00 | 1,250.00 | Cleared, agrees |
| 4102 | 380.00 | not yet paid | Outstanding |
| 4103 | 612.40 | 6,124.00 | Amount mismatch: investigate |
| 4107 | not issued | 2,900.00 | Paid but never issued: investigate |
Check 4103 is the one that matters. The paid amount is ten times the issued amount, which could be a bank error, a keying error on your side or an alteration. Check 4107 has no issue record at all, so it could be a missing entry in your register or a check you never wrote. Neither shows up in a balance-only reconciliation if other items happen to offset it.
What a regular reconciliation does
A regular bank reconciliation proves that the book balance and the bank balance differ only by timing items. It lists outstanding checks as a total. It does not insist that each paid check match what you issued. For how outstanding items are listed, see outstanding checks and deposits in transit. To see where checks fit in a full workflow, bank reconciliation software covers the checks a general tool should run on every statement.
Gaps in the number sequence
Check numbers run in order, so a missing number means a voided check, a lost one or an unrecorded one. Check number gaps and missing statement transactions explains how to test and prove a gap. Dedicated software lists gaps for you; by hand you scan for them.
Positive pay files and check reconciliation software
Positive pay is a bank service in which you send the bank a list of the checks you issued, and the bank pays only checks that match the list. Check reconciliation software can produce that list in the format your bank requires, from the same issue register it uses for matching.
How the bank uses your list
You send the issued list, usually a file with check number, amount and date, before the checks are presented. When a check arrives for payment, the bank compares it to the list. A check that is not on the list, or whose amount differs, is held as an exception, and you decide to pay or return it, normally within a short deadline set by the bank.
Who needs the file
Positive pay is offered by banks to business accounts, often with a fee and a required file format. Ask your bank whether it offers the service, which formats it accepts and what the exception deadline is. Software that produces a file in the wrong layout is no use, so confirm the layout before you choose a tool.
What the file does not do
Positive pay protects against checks you did not issue and, depending on the setup, against altered amounts. It does not reconcile your books. You still need the issued-versus-paid comparison afterward, because the bank may pay an item you approved in error. The two controls work together: positive pay acts before payment, reconciliation after it.
Edge case: can check reconciliation software catch altered amounts?
Check reconciliation software can catch an altered amount only when the paid amount is on a record it can read and the issued amount is in your register. It compares those two numbers and flags a difference. It cannot see the physical check, so it cannot tell how the change was made.
What it can see
If a check you issued for 612.40 is paid at 6,124.00, the paid amount in the bank data does not equal the issued amount, and the software lists it as an exception. The same applies to a payee change only if the bank supplies the payee, which many statements do not.
What it cannot see
It cannot inspect the image of the check, the ink or the signature. It cannot detect a check altered and then paid at the original amount, such as a changed payee. It also cannot tell an alteration from your own keying error. Treat a flagged item as a prompt to pull the check image from the bank and compare it, not as proof of fraud.
Act on the flag quickly
Banks set time limits for reporting unauthorized or altered items, and the limits are in your account agreement. Read that agreement and set an internal date for clearing exceptions each month. PreciseBankFlow lists differences and check number gaps as exceptions with their evidence and never adjusts the numbers to fit, so a mismatch like check 4103 stays visible for review. See the product overview for what it covers today.
Do small firms need dedicated check reconciliation software?
Most small firms do not need dedicated check reconciliation software. A regular bank reconciliation with a check-by-check match is enough when you issue fewer than a few dozen checks a month. Dedicated tools earn their cost when volume is high, positive pay is in use or several people write checks.
When a regular reconciliation is enough
If you write a handful of checks a month, matching them on the statement against your register takes minutes. Keep a register, tick each paid check, list the unpaid ones, and look at the sequence for gaps. This catches the same problems at a scale you can review.
When to move to software
Three signals point the other way:
- Several people or locations issue checks, so no single register is complete.
- Your bank requires or offers positive pay, and you need a file each time.
- You have had a paid-but-not-issued item or an altered amount before.
What to ask before buying
Ask whether the tool reads your bank's paid-check data, whether it produces your bank's positive pay format, and how it shows a mismatch. The account reconciliation software buying questions give a fuller list for comparing tools.