Cash Reconciliation

Each cash account in the books — by currency, bank, custodian and prime broker — is matched to the external statement at both balance and transaction level. Matching rules pair book entries (trade settlements, income, fees, subscriptions, redemptions, margin movements, FX) with statement lines by amount, date and reference. Unmatched items are classified as timing differences, book errors, bank errors or unknown items, and assigned an owner.

Cash reconciliation is usually performed daily for trading funds and at least monthly for private funds. It is one of the most important controls in fund operations because unreconciled cash can hide failed settlements, unrecorded fees, misapplied investor money, or fraud. Most frameworks also require a proof of cash at period end, tying opening balance, receipts, payments and closing balance to the general ledger.

Good practice includes an aged break log with escalation thresholds, four-eyes review of write-offs and adjusting entries, and matching of expected cash (for example a capital call or coupon) before it arrives. Common pitfalls are netting of transactions by banks, value-date versus booking-date differences, and small FX conversion residues that accumulate unnoticed.