If you have ever finished a bank reconciliation and wondered why the closing balance in your accounting software never quite matches the bank statement balance on the same day, you are not alone — and you are almost certainly not dealing with an error. Timing differences are a structural feature of double-entry bookkeeping and bank processing. The skill is knowing what each type looks like, how to track it, and when it stops being a timing difference and becomes a genuine discrepancy.
What Is a Timing Difference?
A timing difference occurs when a transaction is recorded in the books at a different time than it appears on the bank statement. The bank and the accounting records are both correct — they are simply capturing the same economic event at different points in time.
There are four main categories of timing differences in Australian business banking:
Outstanding cheques: A cheque written and recorded in the books but not yet presented to the bank for payment. The books show the payment; the bank statement does not, yet. These are increasingly rare as businesses move to electronic payments, but they still arise in industries that use physical cheques — rent payments, some trade suppliers, rural businesses.
Deposits in transit: Cash or cheques received, recorded in the books, deposited at the bank, but not yet cleared in the bank's system. A deposit made on a Friday afternoon may not appear on the bank statement until Monday. In Australian banking, direct credit payments (EFT, OSKO) clear within hours or same day, but physical deposit receipts can lag.
Bank fees and charges not yet recorded: The bank deducts fees — account keeping fees, transaction fees, dishonour fees — and these appear on the bank statement before they are recorded in the books. Until the bookkeeper codes these transactions, the bank statement will show a lower balance than the books.
Direct debits: Automatic payments (insurance premiums, subscriptions, loan repayments) that the bank processes on a fixed schedule. If the bookkeeper sets up a recurring journal in advance, it can hit the books before the bank processes it. Conversely, if the bookkeeper waits for the bank statement, the books will lag.
How to Categorise and Clear Each Type
The reconciliation process works by starting from the bank statement balance and adjusting to arrive at the book balance (or vice versa). Timing differences appear as reconciling items in this adjustment.
Outstanding cheques: List each uncleared cheque with its date and amount. If a cheque appears as outstanding for more than 30 days, investigate. Most banks will stop honouring cheques after 15 months in Australia, but a cheque outstanding beyond 30–45 days usually means it was lost, the payee has not deposited it, or there is a dispute. Contact the payee before assuming it will clear.
Deposits in transit: These should clear within 1–3 business days in the modern Australian banking environment. A deposit in transit older than 5 business days warrants a call to the bank. Keep the deposit receipt or EFT confirmation as supporting documentation.
Bank fees: Review the bank statement at month-end specifically for fee lines. Most Australian business bank accounts charge fees in the final few days of the statement cycle. Code these to bank charges expense immediately upon sighting them. Set a reminder if your client's bank statement closes mid-month rather than at calendar month-end.
Direct debits: Maintain a direct debit register — a simple list of all authorised direct debits, their amounts, and their processing dates. Cross-reference this against the bank statement monthly. A direct debit that does not appear on schedule may indicate a failed payment (check for a subsequent dishonour fee) or a cancelled arrangement that needs to be removed from the books.
| Timing difference type | Where it appears first | Clear/investigate threshold |
|---|---|---|
| Outstanding cheques | Books (not yet at bank) | Investigate if outstanding more than 30 days; banks stop honouring after 15 months |
| Deposits in transit | Books (not yet cleared at bank) | Clear within 1-3 business days; call bank if older than 5 business days |
| Bank fees and charges | Bank statement (not yet in books) | Code to bank charges expense immediately on sighting at month-end |
| Direct debits | Either, depending on journal timing | Cross-reference direct debit register against statement monthly |
| Any unmatched item (ReconLink rule) | Unmatched items list | No item older than 14 days passes to next period without written explanation |
When Does a Timing Difference Become a Real Error?
This is the critical judgement call. A timing difference that does not clear within a reasonable period — typically one to two statement cycles — is no longer a timing difference. It is a discrepancy requiring investigation.
Common real errors that hide behind timing difference labels:
- Duplicate entries: A payment recorded twice in the books but only once at the bank. It will appear to clear when matched, but the duplicate remains unmatched indefinitely.
- Transposed amounts: A $1,234 payment recorded as $1,324. It may match a different transaction by coincidence or sit as an uncleared item indefinitely.
- Missing transactions: A bank fee, interest charge, or direct debit that was never coded. These often surface at year-end when a diligent accountant notices the bank fee expense account is too low relative to the prior year.
- Fraudulent transactions: An unauthorised payment that a business owner has not noticed. If an unmatched bank transaction sits as "unidentified" beyond a week, escalate for review.
Using ReconLink to Stay on Top of Timing Differences
Bank reconciliation software like ReconLink addresses timing differences directly through automatic matching. You import your bank statements (CSV, Excel or PDF) — or forward them to a per-client email inbox that auto-imports them — and the matching engine flags transactions that appear on the statement but have no corresponding book entry — and vice versa.
The unmatched items list in ReconLink is your timing difference register. Review it daily during busy periods and weekly as a minimum. Set a rule that no unmatched item older than 14 days passes through to the next statement period without a written explanation. That discipline alone will catch most real errors before they compound.
Timing differences are not a reconciliation failure — they are a reconciliation tool. Understanding each type, clearing them promptly, and recognising when they have crossed from timing to error is the foundation of accurate month-end close.