Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to cover how to reconcile business credit card accounts in QuickBooks Online.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin!
Why is Business Credit Card Reconciliation Important?
Similar to your personal credit card accounts, it is important that you reconcile your business credit card accounts on a monthly basis. Reconciling is the process of matching the transactions on your credit card statement to what you have recorded in QuickBooks.
Preparing Business Credit Card reconciliations on a regular basis will help to ensure the following:
- Any discrepancies between your records and the credit card companies are resolved in a timely manner (e.g. a credit card charge that comes through for a different amount from what you authorized.)
- Timely notification of any fraudulent transactions. For example, if you notice transactions listed on your credit card statement that you did not authorize, you can notify the bank as soon as possible so that they can investigate.
What are the Benefits of Reconciling Your Business Credit Card in QuickBooks Online?
These are some of the benefits of reconciling business credit card accounts in QuickBooks Online:
- All transactions on the credit card statement get recorded in QuickBooks.
- All of the reconciled transactions are marked in QuickBooks as cleared. This means your transactions are matched up with what’s on your credit card statement.
- Your financial statements such as the Profit & Loss statement and Balance Sheet are up-to-date.
- You are able to run credit card reconciliation reports that will provide both a summary and detail of all credit card charges and credits.
How Do I Reconcile Business Credit Card Accounts in QuickBooks?
Before you follow the steps to reconcile, be sure that you have your credit card statement handy for the credit card that you want to reconcile. We will refer to the credit card statement often during this process.
Step 1 – Navigate to the Reconciliation Tool
From the Home page, click on the Gear icon to the left of your company name. Below the Tools column, select Reconcile as indicated below.
Step 2 – Enter Info from Credit Card Statement
Complete the fields as indicated below.
- Statement Ending Date – Your credit card statement will have a beginning date and an ending date. Enter the ending date in this field.
- Beginning Balance – Your credit card statement will have a beginning balance. Enter that balance in this field.
TIP: If the credit card was previously reconciled, then this field will display the ending balance of last month which is the beginning balance of the current month and should match the beginning balance that appears on your credit card statement.
- Ending Balance – Enter the ending balance that appears on your credit card statement. This is the amount that you want to reconcile to, meaning that you’ll need to get to this balance at the end after all transactions have been matched.
- Finance Charge – Enter the finance charges that appear on the statement.
- Date of Finance Charge – Enter the statement ending date in this field.
- Account – Select the QuickBooks account you want to use to track finance charges. If you don’t have an account set up yet for this purpose, you can click the drop down and select Add New. In the how to set up the chart of accounts lesson, we walk through step by step how to set up your accounts.
- Click OK once you have completed all of the fields.
On the next screen, we’ve got Charges and Cash Advances and Payments and Credits listed on the screen as indicated below.
Before we begin to match up transactions, double check that the information we entered from the credit card statement is correct. This info appears at the very bottom of the screen. If you need to edit any of this info, just click the Edit Information from Statement link as indicated below.
Step 3 – Reconcile Charges and Cash Advances
Click the Hide transactions after the statement’s end date checkbox as indicated below.
TIP: Hiding these transactions means you won’t see transactions that took place after the statement ending date that you are reconciling. For example, if your ending statement period is 11/30/16, then by checking this box, any transaction with a date of 12/1 and after will not appear. This makes it easier to reconcile your account.
I like to start with the Charges and Cash Advances section. Refer to your credit card statement and for each charge or cash advance that appears on your credit card statement, check it off in the reconcile screen by clicking on it. QuickBooks will put a checkmark next to that item, as indicated below.
TIP: On your paper statement, put a checkmark next to each item as you mark it in QuickBooks.
Once every item on your credit card statement has been marked off, check to see if the Charges and Cash Advances total in QuickBooks matches the total charges and cash advances on your credit card statement, as indicated below.
TIP: Your credit card statement may separate the credit card charges from cash advances. In order for you to match up with the QuickBooks total, you may need to add up these items on the credit card statement to get one total amount.
Step 4 – Reconcile Payments and Credits
Similar to what we just did for Charges and Cash Advances, for payments and credits that appear on your credit card statement, check it off in the reconcile screen by clicking on it. QuickBooks will put a check mark next to that item, as indicated below.
TIP: On your paper statement, put a check mark next to each item as you mark it in QuickBooks.
Once every item on your credit card statement has been marked off, check to see if the Payments and Credits total in QuickBooks matches the total on your credit card statement, as indicated below.
Our goal is to reach a $0.00 difference. If you have a difference, then jump to the troubleshooting reconciliation differences section and try some of the troubleshooting tips I have shared with you.
Step 5 – Generate Reconciliation Reports
Once you have a 0.00 difference, then you want to click the Finish Now button.
Once you click this button, behind the scenes, QuickBooks will mark all of the items that you put a checkmark next to as “cleared.” It will also generate your credit card reconciliation report.
Step 6 – Review & Save Reconciliation Reports
As soon as you get to a $0.00 difference, QuickBooks will automatically generate a detailed reconciliation report of the transactions that cleared your credit card account for the time period that you selected.
TIP #1: Similar to what we discussed in the how to reconcile your bank accounts lesson, you should create a folder to keep all credit card reconciliation reports in.
I recommend one folder per credit card.
TIP #2: Credit card reconciliation reports are one of the TOP 5 reports that auditors will request. In my experience as an auditor, if you are unable to produce these reports, the audit will not go well for you.
8 Troubleshooting Tips for Reconciling Credit Card Accounts In QuickBooks Online
Try some of these tips if you’re having trouble getting a $0.00 difference between what’s in QuickBooks and what’s on your credit card statements:
- If possible, narrow the search down to the transaction type. Figure out if you are out of balance with the charges and cash advances or payments and credits.
- If you are out of balance for both charges/cash advances and payments/credits, then tackle them separately. In other words, balance charges/cash advances first and then move onto payments/credits or vice versa.
- Look for the exact dollar amount that you are off. For example, if your difference is $50.00, then look for a transaction for this amount on your credit card statement and then on both the checks/payments side and payments/credits side of the reconcile window.
- Triple check the information that you entered from the credit card statement.
- Check to see if there are any transactions in the reconcile window that you did not put a checkmark next to. If the transaction is on your credit card statement, then it should have a checkmark next to it in the reconcile window.
- If you do have a transaction on the credit card statement that is not in QuickBooks, then you will need to add it to QuickBooks. To do so, just click the Finish Later button as indicated here:
- If the missing transaction is in Charges or Cash Advances, then enter it as you normally would. In our how to manually enter business credit card transactions lesson, we walk you through step by step on how to enter credit card transactions in QuickBooks.
- If the missing transaction is in Payments or Credits, then enter it as you normally would. In our how to enter credit card refunds lesson, we walk you through step by step how to enter credits in QuickBooks.
- Take a break. If you have been at it for a while and you need a break, clicking the Finish Later button as indicated above will save the work you have done so that you can easily pick up where you left off. Sometimes, taking a breather and coming back can help you spot what’s causing the difference.
- While it might be tempting, I recommend that you don’t click that reconcile button until you have a difference of $0.00. The problem will not go away. The difference will just carry over to the next month until you figure it out.
If you do hit the reconcile button and you have not figured out the difference, QuickBooks will record the out of balance amount in a miscellaneous expense account called unreconciled discrepancies. Of course, if we are talking a small amount (i.e. $5.00 or less), then it might be worth your while to move on. At the end of the day, you get to determine what amount you are comfortable with.
What Impact does Reconciling Credit Card Accounts Have on My Financial Statements?
Reconciling your credit card accounts does not change your financial statements. However, in the credit card register, reconciled charges, cash advances, payments, and credits will be indicated with the letter “R” as indicated below.
TIP: Typically, once a credit card transaction is reconciled, you do not want to make any changes to it. This is primarily due to the fact that you have balanced it with your credit card statement. You can edit the account if you need to (i.e. if you categorized something as meals and entertainment, and it should have been office supplies), but you do not want to make any changes to the date or the amount. If you do, it can cause your financial statements to be inaccurate and you will no longer be in balance with your credit card company.
That wraps up the section on How to Reconcile Business Credit Card Accounts in QuickBooks Online. The next lesson in our QuickBooks Online Training Course will be How to Manage Credit Card Sales with Intuit Merchant Services. In this lesson, we will walk you through a few options for credit card processors and the most efficient way to accept credit card payments in QuickBooks.
To access this lesson or any of the others in the series, click here. For a free 30-day trial of QuickBooks Online, click the link below.