In this article, we will discuss, what is bank reconciliation in QuickBooks, why, and when to do it? Go through the article and know the importance of reconciling your bank statements, and how to perform bank reconciliation in QuickBooks. Meanwhile, if you need further assistance, you can dial our toll-free number +1-844-405-0904 to find a QuickBooks ProAdvisor.
Table of Contents
What is bank reconciliation in QuickBooks?
When you enter transactions like expenses, bill payments, customer invoice payments, deposits, etc in your QuickBooks Online file, each transaction can be checked and matched to bank records, this process is called bank reconciliation. This is required for all your bank account and credit card accounts that are linked with QuickBooks on a monthly basis.
Reconciling your bank accounts regularly will make sure:
- Any reconciliation difference between your records and the banks is resolved timely.
- Timely notification of any fraudulent transactions.
We recommend you reconcile your bank or credit card accounts on a daily basis. This makes sure that your accounting record is always accurate.
Why is it important to reconcile your bank statements:
The Bank Reconciliation is an accounting method that uses two sets of records for ensuring that the figures are authentic and correct. It is a process to conclude whether the money moves an account event and the amount spent. At the end of the recording period, the two values are equal.
Advantage of bank reconciliation in QuickBooks:
- All transactions on the bank statement get recorded in QuickBooks
- All the reconciled transactions are clearly marked in QuickBooks.
- You can run bank reconciliation reports that will provide the details of the items that have cleared the bank and those that remain outstanding (uncleared).
- An advance balance sheet and a financial statement like the profit & loss statement.
- All the reconciled transactions in QuickBooks as emptied.
- You can easily see your business performance.
- It helps you to control cash flow.
- Create and send business invoices in an easy way.
- Track your expenses.
- It is very helpful to manage your business on a computer, tablet, or mobile phone.
- You can get free unlimited support. When you need help, support is available with information.
Why do we reconcile bank account in QuickBooks?
Reconciling your account is important because a daily review of your accounts can help you to find the problems before they get out of hand.
This is important for businesses, accounts, and individuals to examine deceptive activity and to continue financial statement errors.
Catch Fraud
Signs of fraud:
- Was it an accurate statement that your problem makes a copy or change, resulting in more money leaving your account?
- Were checks problems without an authorization?
- Are there unapproved transfers out of the account, or has anybody made unapproved withdrawals?
Prevent Problems
Reconciling your account also helps you to identify problems. For example, you might want to reevaluate how to handle cash flow and accounts receivable, or you might want to change your act of one that records system and the accounting processes you use.
- You have to know how much have available in your accounts.
- Prevent bank fees for not having enough funds or going into credit lines.
- Prevent colleagues and suppliers from bouncing analysis or making failed to computerized payments.
- Know if customer payments bounced or were unsuccessful and if any action is required.
- Keep track of your outstanding checks.
- You need to make sure that entirety is going into your accounting system correctly.
- Catch bank errors.
When you can reconcile your bank account:
It’s reasonable to review your accounts at least monthly. For big-sized businesses or positions where fraud is a risk, more often is better. Some businesses reconcile their bank accounts daily.
You can also build care into your bank accounts – ask your bank for ideas. One solution is Positive Pay, which many banks offer, continuing your bank from accept payments unless you have previously notified them of the payment.
If the accounts don’t get reconcile
Sometimes, you can’t reconcile the accounts. don’t worry if the difference between the two statements is small. As the majority of the reconciliation module allows you to label it as an error. Most probably, you will be able to fix the missing transaction during next month’s reconciliation.
Before reconciliation, some points you need to remember:
- Arrange the bank or credit card account with the accurate opening balance.
- Back up the QuickBooks company file.
- A pencil for designating the selected items on your statement may also be nearby. Take a copy of your bank or credit card statement.
- File all uncleared transactions for the statement period.
How to reconcile bank account in QuickBooks:
Follow these steps to reconcile your bank account in QuickBooks.
Step-1: Check your opening balance
When you are reconciling an account for the very first time, you need to check the opening balance and ensure that it is correct.
When you are creating a new account in QuickBooks to track a bank or credit card account, you need to enter the opening balance.
Step-2: Start the reconciliation
If you have your bank or credit card statement on a monthly basis, you can start reconciliation.
- When your accounts are connected with online banking, ensure that you can match and categorize all your transactions that are downloaded.
- In QuickBooks Online, you have to choose the ‘Setting’ option and click on the ‘Reconcile’ button. When you are reconciling for the first time, you should choose the ‘Get started’ option to continue it.
- From the ‘Account’ dropdown, you should choose the account that you want to reconcile. You have to ensure that this is the same one on your statement.
- You have to check the opening balance and ensure that the opening balance in QuickBooks matches the one on your statement.
- You need to enter the ‘Ending Balance’ and ‘Ending Date’ on your statement. Some banks know the ending balance as a ‘New Balance’ or ‘Closing Balance’.
- When you get it, you should check the ‘Last Statement Ending Date’. After that, your current bank statement has to start after the day.
- If you are ready to move, you need to choose the ‘Start Reconciling’ option.
How to pay the bill:
- You need to choose ‘Pay a bill or a portion of the bill now’.
- You should choose ‘Enter a bill to pay later.
How to see a reconciliation report:
- You have to choose ‘View reconciliation report’.
Step-3: Compare your bank statement with QuickBooks
A comparison of the transaction on your statement is given below.
- Reconcile accounts that are connected to online banking
- Firstly, start with the first transaction on your statement.
- Then, get the same transaction in the ‘Reconciliation’ window in QuickBooks.
- Compare the two transactions. If they match, ‘Tick’ next to the amount in QuickBooks. This marks it as reconciled.
- When the transaction doesn’t show on your statement but you can see it in QuickBooks, don’t put a tick.
- Compare each transaction on your statement according to QuickBooks.
- Reconcile accounts that aren’t connected to online banking
- Firstly, start with the first transaction on your statement.
- Then, get the same transaction in the ‘Reconciliation’ window in QuickBooks.
- Compare the two transactions. If they match, ‘Tick’ next to the amount in QuickBooks. This marks it as reconciled.
- When the transaction doesn’t show on your statement but you can see it in QuickBooks, don’t put a tick.
- Compare each transaction on your statement according to QuickBooks.
- In the end, the difference between your statement and QuickBooks should be $0.00. If it is, choose ‘Finish now’.
Step-4: Review the previous reconciliation
- Firstly, you have to go to the ‘Accounting’ menu and select the ‘Reconcile’ option.
- You need to choose the ‘History by account’ option.
- You should go to the dropdown menu to choose the account and date range or Or print or export your reconciliation reports if you need to share them.
Edit the previous reconciliation
You can do changes to previous reconciliations carefully. Changes can unbalance your accounts and other reconciliations. It also affects the beginning balance of your next reconciliation.
We hope you have found this information useful. For further support and assistance, get in touch with our Intuit certified ProAdvisor team by dialing our toll-free +1-844-405-0904. Thanks for visiting WizXpert.