Welcome to the Fit Small Business QuickBooks Online training course! In this lesson, we’re going to 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!

Why is it Important to Reconcile your Bank Accounts?

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 QuickBooks.

Reconciling your bank accounts regularly will help to ensure the following:

• Any discrepancies between your records and the bank’s are resolved in a timely manner (e.g. a bank deposit that was posted for the wrong amount by the bank).
• Timely notification of any fraudulent transactions.  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 that they can investigate.

What are the Benefits of Reconciling your Bank Accounts in QuickBooks Online?

Some of the benefits of reconciling your bank account in QuickBooks are:

• All transactions on the bank statement get recorded in QuickBooks.
• Your financial statements such as the Profit & Loss statement and Balance Sheet are up-to-date.
• All of the reconciled transactions are marked in QuickBooks as cleared.  
• You are able to run bank reconciliation reports that will provide the details of the items that have cleared the bank and those that remain outstanding (uncleared)

How Do I Reconcile my Bank Account in QuickBooks?

Before you follow the steps to reconcile, be sure that you have your bank statement handy for the bank account that you want to reconcile. We will refer to the bank 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 Bank Statement

Complete the fields as indicated below.

1. Account – From the drop-down, select the bank account that you want to reconcile.
2. Statement Ending date – your bank statement will have a beginning date and an ending date. Enter the ending date in this field.
3. Beginning Balance – your bank statement will have a beginning balance. Enter that balance in this field.
   TIP: If the bank account 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 bank statement.
4. Ending Balance – this is the amount that you want to reconcile to, meaning that you’ll need to get to this balance at the end. Enter the ending balance that appears on your bank statement.
5. Click OK once you have completed all of the fields.

On the next screen, we’ve got Checks and Payments (Withdrawals) on the left side of the screen and Deposits and Credits listed on the right side of the screen as indicated below.

Before we begin to match up transactions, double check that the information we entered from the bank 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.

Bank reconciliation example in QuickBooks Online

Step 3 – Reconcile Checks and Payments

Click the Hide transactions after the statement’s end date checkbox as indicated below.

Bank reconciliation example in QuickBooks Online

TIP: This will help to eliminate all 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.

I like to start with the Checks/Payments/Withdrawals section. Refer to your bank statement and for each check/withdrawal/payment that appears on your bank 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 bank statement has been marked off, check to see if the Checks and Payments total in QuickBooks matches the total withdrawal amount on your bank statement, as indicated below.

TIP: Your bank statement may have each type of withdrawal (i.e. ATM, Checks, ACH) payments separate.  To match up with the QuickBooks total, you may need to add up these items on the bank statement to get one total withdrawal amount.

Step 4 – Reconcile Deposits and Credits

Similar to what we just did for Checks and Payments, for each deposit and credit that appears on your bank 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 bank statement has been marked off, check to see if the Deposits and Credits total in QuickBooks matches the total deposits and credits amount on your bank 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 as indicated below.  

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 bank reconciliation statement or report.

Step 6 – Review & Save Reconciliation Reports

QuickBooks will generate a detailed reconciliation report of the transactions that cleared the bank for the time period that you selected. Below is an example of a bank reconciliation statement. Please note that this example is not for Paul’s Plumbing but is a sample from QuickBooks.

Bank reconciliation statement in QuickBooks Online

TIP #1: Create a folder to keep all bank reconciliation reports in. I recommend one folder per bank account. Be sure to save both the detail and the summary reports.

TIP #2: Bank 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 I can promise you that the audit will not go well for you.

8 Troubleshooting Tips for Reconciling Bank 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 bank statements:

1. If possible, narrow the search down to the transaction type.  Figure out if you are out of balance with the checks and payments or deposits and credits.
2. If you are out of balance for deposits and withdrawals, then tackle them separately. In other words, balance checks and payments first and then move onto deposits and credits or vice versa.
3. Look for the exact dollar amount that you are off.  For example, if your difference is  $21.50 then look for a transaction for this amount on your bank statement and then on both the checks and payments side and the deposits and credits section of the reconcile window.
4. Triple check the information that you entered from the bank statement.
5. 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 bank statement then it should have a checkmark next to it in the reconcile window.
6. If you do have a transaction on the bank 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 Checks or Payments, then enter it as you normally would. In our how to write and print checks lesson, we walk you through step by step on how to create a check in QuickBooks.
   • If the missing transaction is in Deposits or Credits, then enter it as you normally would. In our how to make deposits lesson, we walk you through step by step on how to record deposits in QuickBooks.
7. 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.
8. 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 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 Bank Accounts Have on my Financial Statements?

Reconciling your bank accounts does not change your financial statements.  However, behind the scenes in QuickBooks, the items that have been reconciled are flagged as follows:

In the check register, reconciled checks and deposits will be indicated with the letter “R” as indicated below.

TIP: Typically, once a bank 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 bank 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 bank.

Wrap Up

That wraps up the section on How to Reconcile Bank Accounts in QuickBooks Online. The next lesson in our QuickBooks Online Training Course will be How to Manually Enter Business Credit Card Transactions. In this lesson, we will 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 here. For a free 30-day trial of QuickBooks Online, click the link below.

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