Bank account reconciliation is no fun, but it keeps your balances accurate. Here’s how QuickBooks can help you get ready.
If you had to make a list of your five least favorite financial chores, we wouldn't be surprised to see "account reconciliations" on that list! With the bank feed import feature in QuickBooks Desktop, however, this process becomes much easier. Since it allows you to see your transactions in QuickBooks once your bank has cleared them, you can actually do some of your prep work (also called pre-reconciliation) as frequently as daily, rather than waiting until the end of the month and doing it all at once. How many transactions your business makes within a month will determine how often you'll want to complete these pre-reconciliation steps, but no matter what timeline you're on, here are six helpful tips that can make monthly bank account and credit card reconciliations in QuickBooks Desktop take less time and reap more accurate results. Let's dive in.
Before we Start, Here are Four Perks To Reconciling your Bank Accounts and Credit Cards using QuickBooks Desktop
We strongly advise you to use the reconciliation tools in QuickBooks for a few key reasons. First, it ensures that your QuickBooks balance is accurate, but there are a few more we want you to consider. For example, did you know that you can
Monitor your accounts for unauthorized access,
Ensure that your bill payments have cleared,
Match invoices to payments, and,
Find errors before they can cause significant problems.
In order for your reconciliations to be accurate in QuickBooks, there are six steps you need to take first. Let's get started.
Backup your QuickBooks company file before you start to reconcile
It's essential to backup your QuickBooks company file often, but you'll definitely want to do it is before you begin a new reconciliation. This way, if this reconciliation process goes awry, you can reset to your QuickBooks file to the last fully-reconciled version.
To create a backup file of your QuickBooks company file, open the File menu and click Back Up Company. You’ll choose between Create Local Backup (to a USB drive, for example) and Setup/Activate Online Backup. The latter requires a subscription to Intuit Data Protect, which is included with QuickBooks Desktop Pro Plus and Premier Plus. It costs $9.95 per month or $99.95 per year if you’re not using one of those versions. Intuit Data Protect has a capacity of 100 gigabytes, so you could back up your entire system if you subscribe.
For Connected Bank Feeds - Check to see that you’ve entered all cleared transactions in QuickBooks
If you’ve been importing transactions online, execute a final download of cleared transactions from your bank account. You can get a jump on reconciliation by ensuring that you’ve matched or added everything in QuickBooks that has been imported within the period you’re going to reconcile. In the rare chance that a transaction is missing from your import, but exists on your bank statement, you'll need to make an entry in QuickBooks.
For Manual Entries Without a Bank Feed - Gather Your Financial Statements and Documents
While this happens to be the case less and less, you may have to manually enter all of your transactions into QuickBooks because the financial institution you bank with doesn't "talk" to QuickBooks. Manual data entry is always more time-consuming and can lead to more errors than connected bank feeds--so if you must manually document your financial transactions, make sure you're doing it methodically and with great attention to detail. To save time during this, make sure you've gathered all of your records that document your income and expenses for the time period you're reconciling, including:
deposit slips
your checkbook register
bank stubs
bank statement
expense receipts
anything else that is related to the money you've received or sent during the time period. Setting up monthly folders to keep these documents organized is crucial.
Remember to account for Service Fees and Interest
QuickBooks’ Begin Reconciliation screen, displaying fields for interest earned and service charges. Keep in mind: if you have your bank feeds connected to QuickBooks, this information will already be downloaded. Entering it on this screen again would cause duplication--in this case, just skip this service charge and interest step.
Your interest rates and service charges may look like small change, but it only takes a missing penny for a reconciliation to fail! Remember to enter your interest earned and any service charges as you follow the ste-by-step account reconciliation instructions in QuickBooks. The window pictured above will open when you eventually open the Banking menu and click Reconcile.
Understanding the Reconciliation Process.
A bank reconciliation is the process of comparing your company’s records (such as your accounting books or ledger) with the records from your bank account. The goal is to ensure that the amounts match up and there are no discrepancies between the funds you think you have and the funds that are actually in your bank account.
Completing an account reconciliation ensures that any discrepancies between the two--your ledger and your banking records--is caught, and that you can make any necessary adjustments to make them match up. For example, if an account reconciliation doesn't tie out perfectly, it could be for any of the following reasons:
You've caught an error – Sometimes mistakes happen in your accounting or on the bank’s end. Regular reconciliation helps you spot and correct them.
You've found a missing transaction – You may have forgotten to record something, like a bank fee, interest, or a check you wrote, or a transaction may not have come through your connected bank feeds.
You've detected the chance of fraud – By reviewing your bank statements closely, you can quickly spot any unauthorized transactions and mitigate the damage as swiftly as possible.
If you’ve never reconciled a bank account before, we highly recommend that you schedule a session with us so we can walk you through the process.
Begin checking off all of the deposits and checks that have cleared on your paper statement. The goal is to have a discrepancy on the bottom right of zero. One tip is to click the box at the top right of the screen that says "hide transactions after the statement's ending period." This simply makes it easier to see the transactions you're looking for.
Once you've matched all of your transactions but before you click "Finish Now" in the bank reconciliation screen, remember to ask yourself, "Why are the uncleared transactions still uncleared? Are there old transactions in my QuickBooks that need to be voided or deleted?" We mention this because these transactions are still affecting your balance in QuickBooks.
Navigating the monthly reconciliation process with as little challenge as possible
We wish we could say that bank account reconciliation gets easier the more you do it. While it’s true that the mechanics of the process get clearer with repetition, you can still run into difficulties getting the difference between your QuickBooks account and your bank statement to equal zero. It’s likely that you’ll need our help with this from time to time. Feel free to reach out to us if we can help you with any reconciliation errors you're experiencing.
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