If you already know why bank reconciliation is important for your business than you are in the right place to learn on How to do bank reconciliation in QuickBooks Just like you would keep track of your personal bank accounts, it is similarly important to reconcile your business bank accounts regularly. Should you be new to the vast world of accounting and also just learning how to use QuickBooks Online as your trusted accounting software, you have come to the right place to gain valuable insight about this topic.
In the following blog post we are going to cover the basic aspects on why and how to reconcile bank accounts in QuickBooks. So read on and learn how to set up bank reconciliation in QuickBooks.
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The whole purpose of the bank reconciliation process is to identify any differences that occur between the internal records of your transactions and your bank statement. Your current bank account balance might not be a true representation of your actual assets, since there could be transactions that have not been settled yet. Detecting these discrepancies and mistakes like missed payments, double payments or calculation errors are very important to spot and dealt with accordingly.
It enables you to keep a track of and add bank fees or penalties in your accounting books, while also having a closer look at the accounts payable and receivables of your business. Adjusting these differences to the accounting records as needed, helps resolving the discrepancies and detecting false transactions and also possible theft..
Now that you know the purpose of bank reconciliation, we will answer the question on how often you should you actually do it. And the answer is: it depends. In any case, we strongly recommend performing a bank reconciliation at least once a month, to ensure that all the possible incidents mentioned above are avoided and your company’s cash records are always accurate. The most ideal time is around the same time you get your bank statement alert that is available.
On the other hand, it depends a lot on how many transactions you are dealing with on a monthly basis and also how many bank accounts you are handling. So according to the turnover and size of your company, you might even want to perform a bank reconciliation twice or thrice a month, so it does not get too complicated and confusing at the end of the month.
Follow these steps to go through the whole process and successfully learn how to easily reconcile bank accounts and credit card statements in QuickBooks.
You can either access the Reconcile Page via the gear menu (click the gear icon to open) and clicking on Tools and then Reconcile, or from the Accounting tab in the side panel on the left side, by clicking on Reconcile. Both options work just fine. here is an image on how the the connect a bank account to QuickBooks shall show up
Choose the account you want to work with from the drop-down menu on the Reconcile Page. On the screenshot above you can see that we chose a checking account as an example. Usually you could now just click on Reconcile – or Resume reconciling if you took a break from a previous reconciliation process – but in our case we receive an alert notification (framed in yellow) that tells us, that our account is not ready to reconcile yet.
This alert is caused by the discrepancy of our beginning balance by $-143.21. You can now go ahead and click on “We can help you fix it.” to resolve the issue. In our case it is likely that there is either a deleted or modified previous reconciled transaction. That means that before we can continue reconciling this month, we will have to fix the issue first.
The most common mistakes that mess up reconciliation in QuickBooks Online are:
Changing the date of a transaction.
Deleting or voiding a previously reconciled transaction (like a check or a bill).
Changing the soured account of a previously reconciled transaction.
You will want to avoid these mistakes so you save yourself a lot of trouble and valuable time. If you think that you really need to delete a transaction, check in with your accountant first.
So how to fix the issue now so that we can start the actual reconciliation process in QuickBooks? By clicking on the blue “We can help you fix it.” our Reconciliation Discrepancy Report comes up. In our case it appears that the error is caused by forcefully reconciling an expense by entering an ‘R’ in the checkmark column of the register. This should never be done, because it does not actually reconcile the transaction – all that it does is creating a discrepancy in the records and therefor causing an error.
Fortunately, it is possible to change it back to ‘C’ (standing for cleared) while we are in the Report window.
Click on the green Save button and navigate back to the Reconcile Page.
The screenshot below highlights two more features that you can use to get a better overview of your reconciliation.
Click on Summary to get to a list of prior reconciliations and when they should be completed.
History by Account shows you similar information, but it includes changes and auto-adjustments that were made to the prior reconciliations and it also enables you to print a reconciliation report. Click on View report to get a report that is going to look like the screenshot below.
Note: The more transactions, the longer the report. If you do not need the complete list of transactions, you can check the’ Hide additional information’ box to only see the data up to the statement ending date. This will remove all transactions that are dated past the date you are trying to reconcile.
Click the blue Reconcile link at the top right corner of the report to return to the Reconcile window.
After fixing our issue, we are now ready to start the bank reconciliation process in QuickBooks Online and proceed by entering our statement information.
As highlighted in the screenshot below, there are three important fields to fill in – Beginning balance, Ending balance and Ending date.
Let’s assume we want to reconcile a bank statement for the month ending June the 30th, 2018. Then that is the date we are going to enter as the Ending date. Our statement shows an ending balance of 1,068,099.65 as of June 30. So this is the amount we are entering as the Ending balance. The field for Beginning balance will be auto-populated with the end balance of the previous month (in our case May 2018).
Now click the green Start reconciling button to continue with the process.
Using some key filters will help you locate specific transactions and the window defaults to all transactions in the register that still have to be reconciled by the statement ending date.
The window can be filtered by payments or deposits to streamline the visual. Click on the filter icon (highlighted in the screenshot below) to see more options for filtering your data. This includes Cleared status, Transaction type, Payee and Date. The Find field can search based on memo, reference number, amount and greater than/less than.
You can also edit information from the statement by clicking the Edit Info tab.
If you are still trying to figure out the reason for the discrepancy between the statement ending balance and the cleared balance, you can simply save the work you have done so far and resume at another time.
After clearing all transaction and achieving a zero in the Difference field, you can either choose to view the reconciliation report or just exit if you do not want to run the report right now.
In case you searched your bank statements for hours and hours and cannot seem to find what is causing the difference, QuickBooks records these balances in a miscellaneous expense account. In the end you decide what amount you are comfortable with to leave unreconciled. Amounts of around $5.00 or less might be negligible and not worth loosing even more of your valuable time over.Conclusion:
We hope that we could show you how crucial bank reconciliation with QuickBooks is to manage an organized business. By performing this process monthly in your QuickBooks, you will ensure that your business is in great standing and can never get caught off-guard. Your balances all match and the company data file itself is healthy and safe from getting corrupted.
While the necessity of the reconciliation process is clear and should be a regular task, it can be quite daunting at times. We hope that our guide brought more clarity on how to solve common QuickBooks bank reconciliation problems, and you are now able to keep your books correct and up to date.
Should you still be unsure about how to process bank reconciliations in QuickBooks, please do not hesitate to contact our QuickBooks ProAdvisors for reliable and thorough support.It is is easy to get in touch with our support represantatives, Drop us a line or call us on 1-971-205-3827
Article Name: How to do bank reconciliation in QuickBooks ?
Article Description: In the following blog post we are going to cover the basic aspects on why and how to reconcile bank accounts in QuickBooks. So read on and learn how to set up bank reconciliation in QuickBooks.
Publisher Name: Account Pro Advisor
Christina is a QuickBooks Pro Advisor and a bookkeeper by profession, she has written several blogs and articles related to accounting and bookkeeping with QuickBooks, her knowledge in QuickBooks is immense and she helps QuickBooks users to get their bookkeeping done right and serves all major industries in the US.