Before you find out the need for QuickBooks Bank Reconciliation, it is very important to first understand what Bank Reconciliation actually is. Reconciling QuickBooks is basically an arrangement of matching the financial transactions present on the bank statements to what you have on your QuickBooks record. It should be noted that reconciling bank accounts with QuickBooks is an essential part for the business, as it can smoothly manage the momentous data. It’s important to understand the significance of the bank reconciliation with the help of cash flow analysis of the business.
What Is Bank Reconciliation in QuickBooks Online?
Like in QuickBooks Desktop, bank reconciliation for your business accounting in QuickBooks Online is a separate event. It is its own module, exclusive from the chart of accounts, check register, and bank feed tools. Just because you have entered transactions into QBO using forms, the bank feed, or some third-party data fetching app, you still need to reconcile your bank accounts in QuickBooks.
Typically, you’ll be reconciling your checking, savings, and credit card accounts. Some might reconcile other current asset accounts and other liability accounts, even equity, but this article will focus on how to reconcile bank statements in QuickBooks Online.
Why and When Should You Reconcile in QuickBooks Online?
You should reconcile your bank accounts monthly, ideally around the same time you get your bank statement alert that it is available.
Why is that?
So QuickBooks Online matches what your bank or credit card institution says you have, says you spent, and says you earned. The ending balance of the prior month should match the beginning balance of the next month (even if just for a few seconds!). And your QuickBooks Online register balance at the end of the last month should certainly match the same on your bank statement.
Your accountant will likely be the one who actually does your bank reconciliations in QuickBooks Online. If the chart of accounts is a backbone of accounting and if the bank feed is a backbone tool of QuickBooks Online, then bank reconciliation is the monthly culmination of life inside of your financial data. Reports are important no doubt, but bank reconciliation is crucial to a healthier business existence. If your bank reconciliation is current and the balances all match, the file itself is 98% healthy.
Finally, this essential accounting task might be the very best barometer of how much time it is going to take your accountant to clean up your QBO file.
How to Reconcile a Bank Statement in QuickBooks Online
Let’s walk through a step-by-step example of how to reconcile in QuickBooks Online.
1. Choose the account you wish to reconcile
In QuickBooks Online, you can choose to reconcile any of your connected accounts, as well as bank accounts that are not connected. If you want to reconcile your checking account, you would just choose checking from the drop-down menu. You can also reconcile various asset and liability accounts using the reconciliation feature.
Always make sure that your beginning balance in QuickBooks Online matches your beginning balance on your statement. If you didn’t do a reconciliation for the previous month, these balances may not match. Once you’re certain they do, you can enter the ending balance that’s on your bank statement as well as the statement ending date.
2. Begin reconciling the account
If you have connected your bank accounts with QuickBooks Online, it’s important that all of your downloaded transactions have been matched with recorded expenses. These transactions will also need to be categorized before continuing with the reconciliation process.
Once this is completed, any difference between the two balances will be highlighted on the reconciliation page. If you have very limited transactions for the month, your QuickBooks Online and bank statement balances may match, which is rare but would indicate that further reconciliation is not needed.
3. Compare statement totals with QuickBooks Online totals
The last part of the reconciliation process is to compare statement totals with QuickBooks Online totals. Once an expense on your statement can be matched with a recorded expense, you can click on the circle next to the amount to match the two amounts.
You should continue this process until all transactions have been accounted for by following the same process whether your bank accounts are connected or you’ve entered transactions manually.
Be sure to note any transactions that appear in QuickBooks but are not on your statement, as well as any transactions on your bank statement that do not appear in QuickBooks. These reconciliation discrepancies should make up the difference between the two.
For example, if your statement displays a bank fee or other charge, it’s likely the charge has not been recorded. You can run into the same issue if you use your charge card to pay a bill but forgot to record it in QuickBooks Online.
If you’ve used your credit card to pay an expense but never recorded it in QuickBooks Online, you can use the Expense feature to record the expense properly. Source: QuickBooks Online software.
If that’s the case, all you need to do is record transactions in QuickBooks Online using the Expense screen above. Recording the expense will work to reduce the difference between your bank statement and your QuickBooks Online balance, providing you with your reconciled balance. The same process would need to be completed for deposits made but not recorded in the general ledger by posting them in the Receipts feature.
4.Continue Clearing Transactions Until the “Difference” Field Is Zero
Ultimately, your goal is Success! Window below. Once you get to this page, then you can run the Reconciliation report that we looked at earlier by clicking on “View report.” Alternatively, you can click on “Done” if you don’t want to run the report right now.
Final Word on QuickBooks Online Bank Reconciliation
It’s a good idea to get into the habit of reconciling your bank statements in QuickBooks online on a monthly basis. And the best practice is to do it as soon as you receive your bank statement. As you can see, bank reconciliation is an essential skill in learning how to use QuickBooks Online. However, it is a straightforward, step-by-step process, so get to it!