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Unmatched bank items are often treated as a to-do list, with no ageing policy, no write-off limits and nothing to stop a closed month from changing after sign-off.
Treat each unmatched item as a control and test the vendor's ageing, write-off approval, period lock and reopen rules on day 31, day 61 and day 91 of an item's life.
Ageing from transaction date in 30, 60, 90 and over-90 buckets; write-off limits by amount and age with a second approver and reason code; period lock with logged, approved reopen.
An ageing report by account and reason, a write-off log with approvers, and a change log for any reopened period.
An unmatched bank item is a control, not a to-do. Before you buy reconciliation software, test three rules: how items are aged, who may write them off, and what stops a closed month from changing. Run each test on an item at day 31, day 61 and day 91 of its life.
How exceptions are classified and routed is covered by criterion 6 of the 10-point evaluation framework and by the exception management guide. This page covers governance once an item stays open.
How should ageing work?
Age from the transaction date, or at least show both the transaction date and the date the item first appeared. Use buckets that match your policy, such as 0 to 30, 31 to 60, 61 to 90 and over 90 days. Items brought forward from last month must keep their original dates: an unexplained credit dated 31 July should show as 92 days old on 31 October, in the over-90 bucket, even if it was carried into a new tool in between. The ageing report should run by account and by reason, and your auditor should be able to reproduce it from the export.
Who can write off what?
Write-off rules should depend on both amount and type:
- Bank charges and rounding: a preparer may clear up to a set limit, for example ₹500 per item, if the charge matches the bank’s schedule.
- Unexplained debits: investigate first; write off only with a second approver.
- Unexplained credits: never write off to income without review. The unreconciled credit decision tree explains why.
Every write-off needs a reason code, a link to the supporting note and the approver’s name. The priority vs materiality guide helps set the limits.
What should you ask the vendor to demonstrate?
| Rule | What to ask the vendor to demonstrate | Pass or fail | Audit risk if missing |
|---|---|---|---|
| Ageing from original date | Load a brought-forward item dated 45 days ago | Pass if it shows in 31 to 60 | Old items look new |
| Ageing buckets by policy | Change buckets to your policy | Pass if no vendor change request is needed | Report does not match policy |
| Write-off limit | Try to write off ₹5,000 as preparer with a ₹500 limit | Pass if blocked and routed to approver | Unauthorised write-offs |
| Reason code | Write off without a reason | Pass if blocked | No evidence for auditor |
| Period lock | Change a match in a closed month | Pass if blocked | Signed figures change |
| Reopen with approval | Reopen a closed month | Pass if approval is needed and logged | Silent changes after close |
| Change log after close | Export the log | Pass if user, date and reason are shown | No trail of post-close edits |
How do the rules apply in a worked month-end?
In an illustrative month, 120 lines remain unmatched at month-end. Apply each rule in turn:
- 70 timing items, such as cheques in clearing and NEFT credits posted after the cut-off, stay open and are expected to clear in the first week. They age normally.
- 30 bank charges, totalling ₹9,600 and each within the ₹500 limit, are cleared by the preparer with a reason code. With 18 percent GST included on the bank’s side, the ledger entry splits ₹8,136 to charges and ₹1,464 to input GST (₹8,136 × 18 percent = ₹1,464.48, rounded).
- 20 items need review, including 6 unexplained credits. These go to a second approver and stay open.
After sign-off, the month is locked. The change log should meet the same standard the proviso to Rule 3(1) of the Companies (Accounts) Rules, 2014 has set for accounting software since 1 April 2023, and be kept for the eight financial years required by Section 128(5) of the Companies Act, 2013. If an approver later finds one of the 20 was a wrong match, reopening needs approval and the change is logged.
What does a weak answer sound like?
Watch for “you can export to Excel and track it there”, “any user can reverse a match” and “we do not lock periods, but you can see who changed what”. Each moves a control outside the tool.
How Terra Insight fits
TransactIG delivers bank-to-books reconciliation with an exception queue for unmatched items and audit-ready exports. Bring your open items and policy limits to a representative-sample fit benchmark and test these rules against our setup. See the bank reconciliation software page.