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Imagine this: You’re a small business owner in Nairobi, and you just received your bank statement.
You start comparing it to your records in your cashbook and… hmm, something doesn’t match.
If this sounds familiar, you’ve just stumbled into the world of the bank reconciliation process in Kenya. Don’t worry – it’s not complicated.
Think of it as a friendly “fact-check” between what you think you have in your account and what the bank actually shows.
In this guide by Mugo & Company, we’ll walk you through the process of bank reconciliation in Kenya step by step, and I’ll even introduce you to Faith, a small business owner, to see it in action.
So let’s dive right in!
Still wondering how bank reconciliation can make your business finances easier?
Request your FREE Consultation with Mugo & Co todayWhatsAppAt its core, bank reconciliation is simply comparing your records of money coming in and out (your cashbook) with what the bank says you have.
It’s like comparing two versions of a story to make sure they line up. Doing this helps you:
Think of a bank reconciliation statement as a quick “reality check” for your finances.
It’s a document where you simply compare what your cashbook says versus what the bank says.
Along the way, it helps you spot differences such as:
In simple terms, it’s your way of confirming that your books match what’s actually happening in your bank account.
The bank reconciliation process in Kenya is easier than it sounds. All you’re doing is comparing two records — your cashbook and your bank statement — to make sure they agree.
Before you start, here’s what you need:
Once you have both, here’s the process laid out in the simplest way possible:
Bank Reconciliation Process Steps
| Step | What You Do | What It Means | Simple Example |
|---|---|---|---|
|
1. Compare deposits
|
– Look at every deposit in your cashbook and make sure it appears on the bank statement.
|
– You’re checking that all the money you say came in is actually reflected in your bank.
|
– You recorded a payment of KSh 10,000 from a customer, but the bank statement shows it was deposited the next day.
|
|
2. Check payments & withdrawals
|
– Match every payment, transfer, or withdrawal in your books with the bank’s records.
|
– You’re confirming that the money you say you spent actually left the bank.
|
– You wrote a cheque for KSh 5,000, but the bank hasn’t cleared it yet — so it’s in your books but not on the bank statement.
|
|
3. Add bank charges & interest
|
– Include fees, SMS charges, and any interest the bank added that you haven’t recorded.
|
– The bank sometimes deducts or adds money without notifying you immediately.
|
– The bank deducts an ATM fee of KSh 35 or adds KSh 12 interest, but you didn’t record it in your cashbook.
|
|
4. Correct errors
|
– Fix mistakes in your cashbook (and note any errors made by the bank).
|
– Small errors happen — wrong amounts, missing entries — this step cleans them up.
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– You wrote KSh 1,500 instead of KSh 15,000 in your cashbook — or the bank accidentally reversed a payment twice.
|
|
5. Calculate your adjusted balance
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– Adjust both the cashbook and bank statement until they match.
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– This shows your true balance after accounting for all differences.
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– After adjusting for deposits in transit, un-cleared cheques, and fees, both balances now show KSh 82,450 — meaning reconciliation is done.
|
Let Mugo & Company guide you step-by-step through simplified financial reporting tailored for Kenyan NGOs.
Request your FREE Consultation with Mugo & Co todayWhatsAppSo, why go through all this effort every month?
Because bank reconciliation is one of the simplest ways to protect and strengthen your business. Here’s what it helps you achieve:
Let’s meet Faith. She runs a small cleaning company in Kisumu. Last month, she decided to do her bank reconciliation process in Kenya for the first time. Here’s how her journey went:
| Step | What Faith Did | What It Means |
|---|---|---|
|
1. Gather her documents
|
– Faith collected her cashbook, bank statement, and all receipts for the month.
|
– Before anything else, she simply needed both “versions of the story” — her records and the bank’s records — so she could compare them.
|
|
2. Compare deposits
|
– She found a client deposit of KSh 25,000 in her cashbook that hadn’t yet shown up on the bank statement. |
– This is a deposit in transit — money that Faith has received, but the bank is still processing. Totally normal. |
|
3. Check payments & withdrawals
|
– She noticed a KSh 10,000 cheque she issued to a supplier hadn’t been cleared by the bank. |
– This is an outstanding cheque — Faith has spent the money on paper, but the bank hasn’t deducted it yet. |
|
4. Include bank charges & interest
|
– Her statement showed a KSh 500 bank fee she hadn’t recorded, and KSh 100 interest earned. She updated her cashbook. |
– Banks add and deduct small amounts automatically. Faith needed to capture these so her cashbook stays accurate. |
|
5. Correct errors
|
– Faith spotted a mistake in her records — she had written a deposit as KSh 20,000 instead of KSh 25,000. |
– Errors happen to everyone. This step helped her clean up her books so they matched reality. |
|
6. Adjust balances |
– After all corrections and adjustments, her cashbook and bank statement finally matched. |
– This is the moment everything lines up — the goal of bank reconciliation. Faith now knew her true cash position.
|
(it might guide you on how to create yours)
| Transaction / Item | Cashbook (Before) | Bank Statement | Adjustment | Cashbook (After) |
|---|---|---|---|---|
|
Opening balance
|
Ksh 150,000
|
Ksh 150,000
|
– |
Ksh 150,000
|
|
Client deposit
|
KSh 25,000 (recorded correctly) |
– |
Deposit in transit |
Ksh 25,000 |
|
Supplier cheque
|
Ksh 10,000
|
– |
Outstanding cheque
|
Ksh 10,000 |
|
Bank service charge
|
– |
Ksh 500
|
Added to cashbook |
Ksh 500
|
|
Interest earned
|
– |
Ksh 100
|
Added to cashbook |
Ksh 100
|
|
Recording error (Deposit) |
Ksh 20,000 |
Ksh 25,000 |
Corrected deposit |
Ksh 25,000 |
|
Ending balance |
KSh 185,000
|
KSh 185,000
|
– |
KSh 185,000
|
During the bank reconciliation process in Kenya, you may come across:
| Difference | What It Means | Example |
|---|---|---|
|
Deposits in transit |
– Money you’ve recorded as deposited but hasn’t yet cleared the bank |
– You recorded KSh 20,000 from a client, but the bank hasn’t processed it yet |
|
Outstanding cheques or payments
|
– Payments you made that the bank hasn’t yet reflected |
– You wrote a cheque for KSh 5,000 to a supplier, still uncleared |
|
Bank charges not recorded |
– Fees or transfer charges the bank deducted that you haven’t recorded |
– Bank deducts KSh 200 service charge automatically |
|
Interest earned
|
– Interest the bank added to your account that you haven’t recorded |
– Bank adds KSh 50 interest to your account at month-end |
|
Direct debits or standing orders
|
– Automatic payments from your account you haven’t recorded |
– Monthly subscription or loan repayment deducted automatically |
|
Errors in your cashbook |
– Mistakes in your records, like wrong amounts or missed entries |
– You recorded a deposit as KSh 15,000 instead of KSh 12,000 |
a) Reconcile regularly
Check your accounts at least once a month, or weekly if your business has many transactions. By staying consistent, you catch mistakes early and avoid surprises at month-end.
b) Use accounting software
Tools like QuickBooks, Zoho, Xero, or other accounting software can automate the process of matching transactions. This saves you time and reduces the chances of human error.
c) Keep detailed records
Write down every adjustment, correction, or unusual transaction you make. Having clear records makes future reconciliations faster and easier.
d) Know your bank’s policies
Understand how your bank handles errors, disputes, or suspected fraud. Knowing this helps you act quickly if something doesn’t look right on your statement.
e) Implement internal controls
Separate duties so the person handling cash isn’t the one reconciling the accounts. This simple step prevents mistakes and lowers the risk of fraud, giving you peace of mind.
1. What exactly is bank reconciliation?
2. How often should I do a bank reconciliation process in Kenya?
3.Is bank reconciliation only for accountants, or can I do it for my small business?
The bank reconciliation process in Kenya doesn’t have to feel intimidating.
By taking it step by step – gathering your documents, comparing deposits and payments, checking for bank charges, and correcting errors – you can take full control of your cash.
Just like Faith, even if you’re new to this, you can understand your finances, spot mistakes early, and make sure your books always reflect the reality of your bank account.
With regular practice, bank reconciliation becomes a simple habit that protects your business and gives you peace of mind.
Click the WhatsApp button to book your free consultation with Mugo & Company now.
Or email us at info@mugo-co.com
WhatsAppReady to take control of your business finances? Talk to Mugo & Company today and book your first free consultation.
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