Welcome to the Fit Small Business QuickBooks Online training course. In this lesson, we cover how to reconcile bank accounts in QuickBooks Online. You can follow along on your own QuickBooks Online account. If you don’t have one already, click here to sign up for a free 30-day trial and follow along below.
To complete this lesson, you can either watch the video below, read through the step-by-step instructions, or do both. Let’s begin.
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Why Bank Reconciliation in QuickBooks Is Important
Similar to your personal bank accounts, it is important that you reconcile your business bank accounts on a monthly basis. Reconciling is the process of matching the transactions on your bank statement to what you have recorded in your accounting software.
Reconciling your bank accounts regularly helps to ensure:
- Discrepancies are resolved quickly: Any discrepancies between your records and the banks are resolved in a timely manner (e.g., a bank deposit that was posted to the wrong account by the bank).
- Timely notification of any fraudulent transactions: Reconciling your bank account consistently alerts you to fraudulent activity sooner. For example, if you notice transactions listed on your bank statement that you did not authorize, you can notify the bank as soon as possible so they can investigate.
Benefits of Preparing Bank Reconciliations in QuickBooks Online
There are several benefits of preparing bank reconciliations in QuickBooks. First, you can be confident that all transactions on the bank statement are recorded in QuickBooks. Second, your profit and loss and balance sheet reports are automatically updated as you record transactions. Third, transactions are marked cleared in QuickBooks like they are with your bank. Finally, you can generate bank reconciliation reports that show the details of all cleared and uncleared items.
How to Reconcile in QuickBooks Online in 5 Steps
Reconciling your bank account in QuickBooks Online (QBO) can be done in five easy steps. First, navigate to the bank reconciliation tool. Second, select the bank account you want to reconcile. Third, compare the bank statement to QuickBooks to match transactions. Fourth, confirm you have a zero difference. Finally, generate the bank reconciliation report and save it. Be sure to have your bank statement handy before you begin reconciling.
Below are the five steps to bank reconciliation in any version of QuickBooks Online:
1. Navigate to the Bank Reconciliation in QuickBooks Tool
From the home page, click on the gear icon to the left of your company name. In the Tools column, select Reconcile as indicated below:
2. Select the Bank Account to Reconcile
In this step, you need to provide information such as the bank account, ending balance of the statement you are reconciling to, and the bank statement date.
Complete the four fields as indicated below:
A brief description of the fields you need to complete are:
- Account: From the drop-down, select the bank or credit card account you would like to reconcile.
- Beginning balance: This field is auto-populated with the ending balance from the previous month’s statement. Tip: If your beginning balance does not match, you will see a notification similar to the one below. Click the “We can help you fix it.” link and follow the steps to resolve the difference before you proceed with the current reconciliation:
- Ending balance: In this field, you enter the ending balance that appears on your bank statement.
- Ending date: Enter the ending date of your bank statement in this field.
- Start reconciling: Click the Start reconciling button to proceed to the next step.
3. Begin Matching Transactions
In this step, you compare the transactions on your bank statement to what is in QuickBooks. Mark each transaction that appears on your bank statement in QuickBooks to “match” the two.
A snapshot of the new and improved bank reconciliation layout is below:
Begin matching bank transactions in QuickBooks Online
A brief description of the information you will find in the bank reconciliation layout is:
- Statement ending balance: This is the amount you entered from your bank or credit card statement.
- Beginning balance: This amount is the ending balance from last month’s statement. QuickBooks will populate this field for you.
- Cleared balance: As you begin to reconcile each item, this amount will change depending on whether you have selected a payment or a deposit transaction.
- Payments: This amount increases as you select payments to reconcile from the detailed transactions section below.
- Deposits: This amount increases as you select deposits to reconcile from the detailed transactions section below.
- Difference: This field is calculated by QuickBooks. It is the difference between your statement balance and the cleared balance. Your goal is to get to a difference of zero.
- Transactions: In this section, you will see all of the payments and deposits that have been recorded in QuickBooks as of your statement ending date. As you can see in the screenshot above, you can filter this section to just show payments, deposits, or all by clicking on the appropriate tab.
There is no right or wrong way to reconcile. However, I suggest that you reconcile the area with the least number of transactions first. Remember that your goal is to make sure that every deposit and withdrawal listed on the bank statement is marked as “cleared” in this reconciliation window.
To mark an item as cleared, you simply click the radio button to the right of deposit column as indicated in the screenshot below:
Mark bank transactions cleared in QuickBooks Online
Let’s say that you decide to start with deposits. Once you have marked all of the deposits that appear on your bank statement in this window, verify that the total deposits cleared match the total deposit amount on your bank statement.
In the example below, the total deposits on our bank statement ($5,017.17) match the total deposits we have cleared in QuickBooks ($5,017.17), so we can move onto payments. However, if your deposits are not in balance, head over to the next section for tips on how to fix this issue.
Sample Bank Statement to Review Deposits & Credits
Deposits Cleared in QuickBooks
Repeat the same process of marking items that appear on your bank statement for withdrawals (payments) as cleared. Make sure that the total payments cleared in QuickBooks match your bank statement.
In the example below, total withdrawals (payments) on our bank statement ($2,496.53) match the total withdrawals we have cleared in QuickBooks ($2,496.53). If it does, you can move onto the next step; however, if your withdrawals (payments) are not in balance, head over to our troubleshooting tips section.
Sample Bank Statement to Review Withdrawals & Debits
Withdrawals & Debits Cleared in QuickBooks
4. Confirm the Bank Reconciliation in QuickBooks Has a Difference of Zero
This is a critical step in the bank reconciliation process. Once you have matched all transactions, the difference should be zero. If it’s not, do not click the Finish now button. Instead, try some of the troubleshooting tips below to locate the issue.
Once all deposits, withdrawals, and payments match the bank statement, you should have a difference of $0.00 as indicated in the screenshot below:
Click the Finish now button to generate the bank reconciliation reports. Behind the scenes, QuickBooks marks all of the deposits and credits that have been reconciled as cleared.
5. Review & Save QuickBooks Bank Reconciliation Reports
This is a snapshot of the detailed bank reconciliation report QuickBooks generates:
Review and save QuickBooks bank reconciliation reports
Below are a couple of tips you should keep in mind as you reconcile your bank accounts:
Tip 1: It’s important to save all bank reconciliation reports for every bank account. I recommend you create a folder for each bank account to keep these reports. To learn more about organizing key reports and documents such as this, check out our Small Business Bookkeeping Guide.
Tip 2: Bank reconciliation reports are one of the top five reports that auditors request. In my experience as an auditor, if you are not able to produce these reports, I can promise you that the audit will not go well for you.
How Bank Reconciliation in QuickBooks Affects the Financial Statements
Reconciling your bank accounts does not change your financial statements. However, the items that have been reconciled are flagged in the QuickBooks check register as reconciled. This means that the transaction has come through and cleared your bank account.
In the check register, checks and deposits that have been reconciled will have the letter “R” next to them, as indicated below:
Reconciled checks and deposits in QuickBooks Online
TIP: Typically, once a bank transaction is reconciled, you don’t want to make any changes to it. This is because you have balanced it with your bank statement. You can edit the account if you need to (e.g., you’ve categorized something as meals and entertainment that should have been office supplies), but you do not want to make any changes to the date or the amount. If you do, you will no longer be in balance with your bank.
8 Troubleshooting Tips for Bank Reconciliation in QuickBooks Online
Whether you have done a number of bank reconciliations or if it’s your first time, you will at some point encounter an issue. We have compiled eight troubleshooting tips to help you resolve bank reconciliation discrepancies.
Below are eight troubleshooting tips to help you resolve bank reconciliation discrepancies:
- Narrow your search to transaction type: Determine if you are out of balance with the withdrawals and payments or deposits and credits. This will make it easier to find the difference. However, there may be times when you will be out of balance by multiple transaction types.
- Balance one transaction type at a time: If you are out of balance for deposits and withdrawals, then tackle them separately. In other words, balance withdrawals first and then move onto deposits and credits or vice versa.
- Look for the exact dollar amount of your difference: For example, if your difference is $21.50, look for a transaction for this amount on your bank statement and then on both the withdrawals and payments section and the deposits and credits section of the reconcile window.
- Review the bank statement information: Triple-check the information that you entered from the bank statement, such as ending balance and date, to make sure they are correct.
- Unmarked transactions in QuickBooks: Check to see if there are any transactions in the reconcile window that you did not select. If the transaction is on your bank statement, then the radio button should be marked in the reconcile window.
- Add missing transactions to QuickBooks: If you do have a transaction on the bank statement that is not in QuickBooks, then you need to add it to QuickBooks. To do so, just click the Finish later button to save your work.
- If the missing transaction is a withdrawal or payment, enter it as you normally would. We walk you through the steps of writing and printing checks in our how to create a check in QuickBooks tutorial.
- If the missing transaction is a deposit or credit, enter it as you normally would. We show you the steps for making deposits in our tutorial on how to record deposits in QuickBooks.
- Take a break: If you have been at it for a while and you need a break, QuickBooks allows you to pick up where you left off. Select the Finish later option to save the work you have done so far. Sometimes, taking a breather and coming back can help you spot what’s causing the difference.
- Do not finalize reconciliation if you have a 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 just carries 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 records the out of balance in a miscellaneous expense account called unreconciled discrepancies. Of course, if we are talking about 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.
Bottom Line
That wraps up the section on How to Reconcile Bank and Credit Card Accounts in QuickBooks Online. The next lesson in our QuickBooks Online Training Course is how to manually enter business credit card transactions. In this lesson, we walk you through what to do after you have imported your credit card transactions into QuickBooks.
To access this lesson or any of the others in the series, click the links below. You can also take QuickBooks for a test drive by signing up for a free 30-day trial.
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Joane Dibenedetto
March 30, 2018 at 7:15 pmAwesome information once again! I am looking forward for your next post:)
http://rampagefull.net/
Crystalynn Shelton
April 3, 2018 at 3:59 pmHey Joane, thanks so much for the positive feedback! Glad you are enjoying our QuickBooks Video Tutorials!
Best-
Crystalynn Shelton
Maribel Serna
January 15, 2018 at 6:02 pmHi Crystal, thanks for your teachings!
I have a problem in a reconciliation, I mistakenly deleted some transactions that were already reconciled … I have made the process indicated by the videos and tutorials, but I can not reconcile!
What I can do?
Crystalynn Shelton
January 16, 2018 at 6:54 pmHi Maribel!
Glad you are enjoying the video tutorials. In general, if you know which transactions were deleted you can just add them back to QuickBooks and then mark them as reconciled again by adding the check mark directly in the check register. However, if you are not sure which transactions were deleted (but you know the month they belonged to) then you will need to find a QuickBooks ProAdvisor who can actually “undo” the bank reconciliations for the months in question. The “undo” tool is only available in the QuickBooks Online Accountant (QBOA) version. If you have this version then you should see an option to undo reconciliation where all of the reconciled months are listed.
If you don’t have the QBOA version, use the tips in our How to Find a QuickBooks ProAdvisor article to locate a QuickBooks Pro who can take care of this for you:
https://fitsmallbusiness.com/how-to-find-a-quickbooks-proadvisor/
Best wishes for a prosperous 2018,
Crystalynn Shelton
Warren
January 11, 2018 at 2:16 pmThe general issues with bank reconciliation is either a transaction is not being shown or a transaction is shown but already been reconciled. Thus, you will need to refer back to the bank to do the rectification.
Crystalynn Shelton
January 16, 2018 at 6:54 pmHey Warren, thanks for offering your tips on bank reconciliations!
Best wishes for a prosperous 2018,
Crystalynn Shelton
Jac Marting
November 8, 2017 at 10:32 amThank you so much for sharing the step by step process for bank reconciliation in Quickbooks Online. Now it seems very easy to reconcile the bank account in QuickBooks.
Crystalynn Shelton
November 8, 2017 at 10:22 pmHi Jac, you are very welcome! Thanks for being such a “fan” of our website!
All the Best-
Crystalynn Shelton
Lois
May 17, 2017 at 6:53 pmAre prior months bank reconciliations saved in QB to access later? Our HOA books were transferred from the QB Enterprise desktop version to QB online and we have not been given the bank recs and statements from this year. The homebuilder in March just turned over the HOA to the homeowners and they transferred our books into QB online as they said they could not be transferred into the QB desktop version. I am learning from your website, and am getting no help from the builder. Nor have I been able to get them to send our current years bank recs and statements. So I would like to at least be able to see these online.
Crystalynn Shelton
May 18, 2017 at 8:24 pmHi Lois, I’m so glad to hear that you are learning QB from our course! To answer your question yes every reconciliation is saved in both the desktop and online versions of QB. To access the reports online just go to Reconcile and you should see a list of reconciliation reports that you can click on to view.
If you are not sure how to get to reconcile, watch the bank reconciliation tutorial which can be found here:https://fitsmallbusiness.com/bank-reconciliation-quickbooks-online/.
Best-
Crystalynn
Lois
May 18, 2017 at 11:31 pmI got to the Reconcile and this is what I see
Reconcile
Account
Reconcile Now
Reconciliation History & Reports
Statement Ending Date
Reconciled On
Ending Balance
Changes
Auto Adjustment
There is no reconciliation history for this account, since it hasn’t been reconciled before.
I know that they have reconciled before but it would have been done in their QB Enterprise version that was transferred to our new QB online system. So does this mean that those recs didn’t transfer?
Also, do you happen to know if you inactivate an account does the transactions that go with that account for the current year get deleted so to speak from the current year numbers? We are an HOA and the builder had just been changing the customer name when a house was sold between either the builder and homeowner or between homeowners. What that did was make all transactions for the prior owner now look like they belong to the new owner and that shouldn’t be that way correct. I believe you should inactivate the old homeowner account and set up the new homeowner with their own account. I just don’t know how these accounting programs work. I have never worked with any kind of accounting system like quicken, quickbooks, etc.
Thank you
Lois
Crystalynn Shelton
May 30, 2017 at 4:16 pmHi Lois, apologies for the delayed response. Unfortunately I do not believe that your reconciliation history in QB Enterprise will transfer over to QB Online. Therefore, it is very important for you to keep the reconciliation reports that exist in the desktop program.
As far as inactivating an account; yes the transactions that go with the account for the current year will still show up on reports (even though the account has been inactivated). You are also correct with how to handle this going forward. Instead of changing the customer name you want to inactivate the old customer and set up the new homeowner with their own account.
All the Best-
Crystalynn