Reconciliations are one of the most important tasks that bookkeepers can do to confirm that all of the transactions are in the accounting system (QuickBooks Online in this example). I talk about reconciliations a lot in my courses. Today, I wanted to share a portion of the QBO Month End Master Course where I speak to the importance of reconciliations and how to prepare them in QuickBooks Online. I also point out all the options we have to use on the reconciliation screens and more.
How to Perform Reconciliations in QuickBooks Online
Why are Reconciliations Important?
So let’s talk about our reconciliation options, and we’re gonna go through these next slides a little quickly and then we’re gonna go into QBO so that you can see more of like how it all works and running around and stuff, but before I do that, let’s talk about, step back and let’s talk about reconciliations and why we’re doing reconciliations and why it’s so important.
If you go back and think about the financial statement assertions that we talked about in the first chapter, we wanna make sure that our accounts are complete and they’re accurate, that we have everything in here, that everything is booked in the right area. So it’s really important to do these reconciliations. They’re a way to lock down the transactions for a month. Once you do a reconciliation on a transaction, it is marked as reconciled and if you try to change it, you’re going to get an error message that you tried changing it and is this okay and stuff like that. So it is kind of locking it down for you.
Matching QuickBooks to the Bank Statement
And so with the reconciliation, the concept is that our ending balance in QBO is going to match the ending balance of the bank account. So we are verifying that those two systems match each other.
Now more often than not, the balances are different, right? For some reason or another. And, it’s our job through this reconciliation process, to figure out why it’s different and if that difference is because of something that is inaccurate or if it’s because of something that is accurate and it’s just a change that will happen over time.
So, an example of inaccurate is if we have duplicate transactions, well one cleared the bank, one didn’t because it’s a duplicate. That is an inaccurate transaction that we need to remove from the bank account, so we’re not overstating what is in the bank
account or understating what is in there.
On the other side, maybe we wrote a check to someone within the current month that we’re reconciling but it hasn’t cleared the bank yet. That’s really, really common, right? So with that, it’s okay, it’s an acceptable transaction to have within our bank reconciliation. It’s something that hasn’t cleared the bank yet and hopefully, it clears the next month when we do the reconciliation again for that next month.
The QuickBooks Reconciliation Screen
Here is the reconciliation screen. Here’s how we’re accomplishing all of that. You can see the statement ending balance, so this is coming off of the bank statement and then the cleared balance is what is in QBO. We want the difference of the two to be zero, right guys? We want it to be zero.
So some things to note on these screens,
- We have the gear icon where you can adjust the table right here, and I’ll show you a little bit more of that in a second.
- Then we have options to filter things with payments, deposits, or all.
- Now here you can see the cleared date, this is something newer within QBO, where this is the date that came, that came from the bank feed itself, so the bank posted the information, it came through to the bank feed and we entered it so it’s the difference between when the transaction date is and when it actually cleared the bank, which is a nice little thing
to be looking at, right?
- And then we also have several more filter options on here and to be able to pinpoint stuff.
So let’s take a look within QBO so we can move around a little bit better. Okay, so here we are on the reconciliation screen within my test company. So this is the beginning where we put in our information.
Beginning Balance Warning
You already see right here it’s like hold on, your account isn’t ready to reconcile. I beg to differ on this one. This little error message that comes up, if there is a difference in your beginning balance or something like that, yes, you can use these tools to fix it, but let’s just check and see what’s going on within the area so that we can, maybe we can fix it within the bank reconciliation screen, maybe we don’t need that extra tool in here.
So if we come into checking, okay, pick my account, yes, my beginning balance is off for some reason, it’s $1,000 off. We put in the ending balance and our ending date. Guys, maybe I don’t know my ending balance right now. I just wanna check out what’s going on. So I do this, start reconciling.
Well first of all, here’s my $1,000 difference, okay, that’s from awhile ago, great, I can take care of that. That gets rid of, fixes that balance. But hey, look, this edit info screen, it lets me change this amount so maybe I want it to be here. We’ll just update it. And so you can change that. You can change the date and that information right here.
Flexibility in the Reconciliation Screen
So it’s flexible, don’t freak out that you didn’t get the right information when you started it. Again, I have this, it’s cleared in here, high likelihood that when your beginning balance is off and you are in charge of the bookkeeping and everything, as long as you’re in control of most of this process with the transactions, biggest likelihood is it’s already sitting in here when the amount is off.
You’re just gonna come in here and check it off and you’ll fix it. You don’t have to go through that other screen to work on things. So let’s look at some of these options.
So I told you the gear icon. So we can come in here and I can get rid of the reference number, payee, this sort of stuff. I can change the density, woo-hoo, of these things. It’s all usability to try to make life easier for you when you’re doing these reconciliations.
Now again, if you were in control of the bookkeeping process and you’re doing the bank feeds, then this really, really bank correction should only take a couple seconds because if you’re using bank feeds, it’s all cleared, it’s already pre-checked off, and you should be good to go, right?
But if not, then we need some help with this screen, so maybe I just wanna look at deposits because that’s the first part of the bank statement. I just wanna click off all of those first and then I can go into payments and I can click off of those because that’s the way the bank statement’s shown to us. I can go back to all, I can sort any of these, whichever way I want to. Again, you have tons of options.
The Cleared Date in QuickBooks Reconciliations
Sometimes I just sort by number if I can’t find something ’cause that way I can get to the number faster, right? Then you know like I showed you before, the cleared date, the date of the transaction versus the cleared date. So sometimes you might find something that, so like these transactions didn’t clear, what if your dates are like two months apart? Well maybe for a check, but if it’s for an expense or something you brought in, then maybe it was not matched to the correct transaction, and maybe you really need to unmatch that, fix it, clean it up, and you know, it’ll work better going forward.
Statement Ending Date Filter in Reconciliations
Then you know how the ending date happens so in this example 5/31, maybe QBO booked a transaction on 6/1 but it was really
on the 5/31 statement, you can get rid of that little X, so it automatically stops it for you at 5/31 and if I get rid of it, then I can see more transactions in here, I can reset it, send it right on back to the 5/31 ending date.
Filter Options in QuickBooks Reconciliations
Here are all my filter options. Again, this is great when you’re trying to find stuff to complete your bank rec, but the majority of cases if you’re doing all the work, you shouldn’t have to use all this stuff. You can just look for certain bills, you know, anything that is a bill in here, okay, I didn’t have any. Let’s see, I see credit card credit, apply. Okay, I have one, right? So I have that, I can go down to a specific amount, all of this stuff in here, guys I can do.
Manually Changing Reconciled Transactions
Now if you aren’t finding the transaction you need in here, it’s possible that it’s already been reconciled, and if it’s been reconciled in a prior period or something like that and it shouldn’t be, then you can actually go into the bank register, so if I come into here, this is a little bonus information, you can see here, you can manually change this information. So like I just got rid of the R and I save it. I can come back in here, I can change it to a C which just means cleared, it’s not a hard reconcile. And again, when we have a C and we go in and we go for the reconciliation it’s already gonna check off this transaction for us. And I can save it, or I can come back in here, reconcile.
Why is there a Beginning Balance and the Account Was Never Reconciled?
Just a few things to note again, if it has an R on it, no matter the time period, so if I’m doing the May 31st bank reconciliation and this transaction is in August, I will not see this transaction in my bank recs, even if I say show me all periods going forward. Just because it has an R, it is going to show up as reconciled and it’s going to impact my ending balance in here. So, or my beginning balance in here.
So one of the common issues that people have is when they set up a new account, it pulls in the last 90 days or 60
days, whatever it is, but you have that beginning balance in there. And sometimes, QBO just puts in an entry to opening balance equity for that beginning balance. It’s like here, I’m just plugging it in for you. Well they automatically put an R on it, so when you go in to reconcile for the first time, you have a beginning balance, and you’re like no, I’ve never reconciled this account, how can I have a beginning balance? This is not possible. Well, you wanna go into the bank register and look for that R and get rid of it because that is throwing everything off for you.
Changing the Ending Balance and Ending Date on the Reconciliation Screen
So if we go back into this reconciliation screen, resume reconciliation, hey, I fixed this, I can go through all of here, I can click everything. Maybe some of these transactions didn’t clear in the month and really, I’m going backwards into it, maybe my ending balance should’ve been $7548.35 on the bank account. I can come in here, change that. I’m showing you what you can do, don’t do this just because you don’t have a bank statement. Make sure you get the bank statement and run off of that, please. But then we also have these other options, so we can finish now, which will close it out. It will mark all of these transactions as R in the bank register.
If there’s a difference, we get the option to record a reconciliation adjustment. Another one, please don’t do big reconciliation adjustments. I’m okay if it’s a couple cents or a dollar, but if it’s a lot, then that means you did something wrong and spend the time to fix it, please.
Reconciliation Saving Options
Save for Later
So we can finish now, I can save for later, so if I save for later, it’s saved, all the information I’ve done so far is in there so I can resume the reconciliation. Everything that I had checked off before is now still checked off and I can just finish it out.
Close without Saving
If I do close without saving, it removes all of this information, it removes everything I put in for the ending balance, the date, everything I checked off, it gets rid of it all. So be extremely careful when you’re closing this out if you are not done to do save for later. There are just a few instances when you wanna do close without saving but most of the time you want to save for later, okay?