Reconciling 101

You’re a savvy business owner. You know Intuit’s QuickBooks “QBO” is your accounting software and it produces your company’s accounting file. You know you—or your bookkeeper—are supposed to reconcile your transactions at the end of the month. What you might not know is that once your transactions are reconciled—and only then—you can populate reports that string together all of your financial information.

You can’t create these holistic reports within your bank, where all your information is siloed, so you have to ensure the information in your accounting file matches each of your bank and credit card account statements by reconciling.

What Is Reconciliation?

When used in reference to accounting and finance, reconciling means comparing two documents to make sure they match. More specifically, you’re making sure the data in your QBO accounting file matches what you see on your bank statements. This is also referred to as bank statement reconciliation, bank reconciliation, or credit card statement reconciliation, but most folks refer to it as simply “reconciliation” for short.

Through this process, you’ll want to make sure you’re reconciling each one of your checking accounts, savings accounts, and credit card statements to make sure your QBO account balance information matches your account statement. Any differences between the two should be (you guessed it) reconciled.

How Often Should I Reconcile?

To be as accurate as possible, you should reconcile transactions monthly. When you’re ready to start reconciling in QuickBooks Online, here are six easy step-by-step instructions for you to follow.

Step 1: Gather Your Bank Statements

Whether they are mailed or emailed to you, you should gather your bank and credit card statements before you begin reconciling your accounts in QuickBooks. These will be your source of truth to compare your accounting file against because these are the transactions that have officially been posted to your bank account.

Step 2: Log in to QuickBooks Online

Go to QuickBooks Online login page and enter your credentials to access your account.

Step 3: Select an Account to Reconcile

Navigate to the “Reconcile” page by clicking the gear icon, then in the “Tools” column you’ll select “Reconcile.” Once you’re on the Reconcile page, you’ll select a bank account to reconcile from the drop-down menu.

Step 4: Input Bank Statement Information

Once you’ve selected which account you’d like to reconcile, enter the ending balance and ending date as it’s listed on your bank statement. There’s also a beginning box that is listed there, but you won’t need to edit that.

Keep in mind, the ending balance of the month prior should match your beginning balance of the current month each time you begin. Current reconciliations and balances that match are the first signs that your accounting file is healthy.

Step 5: Clear Transactions

Now comes the part where you’re actually reconciling. With your statement nearby, you’ll match transactions to your bank statement (The transactions listed on your statement will be only the ones that have cleared.) and check that the amount listed on your statement matches the amount listed in your accounting file. It’s best to move down the page on your bank statement to ensure every transaction there is checked against something in your accounting file, rather than the other way around.

If the transaction amounts on your statement and in QBO match, check them off one by one on the far right side of the page. Keep them check-marked, and you’ll notice the “Difference” section at the top changes in amount as you go.

Once you’ve gone through all the transactions shown on your bank statement, if the amount in your QBO file does not match the amount listed on the statement, you should update the amount in your QBO file to reflect the cleared balance in your bank statement. Keep in mind, your bank statement is the official record that you’re reconciling your accounting file against.

Tip: Filter Transactions

There are times that your bank statement and accounting file will have hundreds of transactions needing to be reconciled. This is typical for small business accounts and shouldn’t cause you any alarm—spending and earning both fluctuate which is how these transactions populate in the first place. Filtering can help you process them faster and greatly reduce the amount of work needed to clear your transactions. On the far left side of the reconciliation screen, you’ll notice a filter icon. Use this handy tool to apply more filters so transactions are easier to find, but don’t forget to clear them when you’re done.

The filter tool will let you filter by payments, deposits, cleared status, transaction type, payee, and date—including specific ranges. The Find field can also search for specific memos, reference numbers, amounts, and greater/less than. Work through each transaction in your bank statement and use the available filters to quickly find them in your QBO.

Step 6: “Finish Now”

Continue check-marking transactions until you have found every transaction listed on your bank statement and the “Difference” field up at the top of the screen is “zero.” When that happens, you’ll see a green checkmark appear. Once you’ve clicked the green “Finish Now” button that appears where the “Save for later” button usually sits, your account is reconciled. Congratulations, you’ve done it! You’re ready for the next accounting period.

Common Troubleshooting Questions

These aren’t steps you need to go through to complete your process, but extras that will help you along the way. We’ve gathered a few tips and information from the experts and listed them below.

What if the Difference Isn’t Zero?

The difference field will always get to zero. If you’ve reached the end of your statement and your difference lists anything other than zero, go back and check to make sure you’ve checked off every transaction listed. Filtering transactions will come in especially handy if you run into this.

Adding Transactions From The Account Statement

As you scan your account statements you may find that a charge was missed in your accounting file. In order for your reconciliation to be accurate, you’ll need to add that transaction in and reconcile it. To do this quickly select the “+ New” button on the left navigation bar, from the reconciliation window. Choose the appropriate transaction description and drop all of the details in. Then, click the Save and New button or the arrow next to it to select Save and Close.

How to Make Edits

If you need to update the ending balance or ending date that you entered in Step One, simply click the “Edit Info” button in the upper-right of the page. A screen will open to let you make the changes, and you can save or cancel those changes from there.

Don’t Forget to Save Your Work

Make sure you save your work before you exit out of the screen. Next to the “Edit Info” button in the upper-right corner of the page, you’ll see a button that reads “Save For Later,” with a drop-down arrow beside it. You can save and come back later, in case you need to run to another meeting or have other important tasks to complete—like payroll. You can also choose to “Finish Now,” or “Close Without Saving” if you need to abandon the work you’ve done and start over.

What Comes Next?

Once completed, you’ll be able to access your finalized work as a reconciliation report. You can find these at any time by navigating to the Reconcile page in QuickBooks, then clicking on the Summary link in the left corner of the page.

Make sure to repeat steps one through six for each bank account statement you receive. You’ll need to do this for each credit card, savings account, and checking account your business has before you—or your accountant—close the books for the month. Keeping your reconciliations up-to-date will help you ensure that your business, and accounting file, are healthy and ready to take on any growth or challenges around the corner.

A healthy accounting file with proper reconciliation will super-charge the rest of your finances. There’s a reason we say bookkeeping is the building block of your business finances—it is! These steps, from bookkeeping to reconciliation, will set up the rest of your financial reporting. This gives you data you can lean on or wishy-washy numbers you lose sleep over.

It all comes back to keeping a pristine accounting file. Want to make sure your file is in tip-top shape? Need help with your monthly reconciliation? Contact Arena today!