Welcome to the Fit Small Business QuickBooks Online training course. In this lesson, we cover how to reconcile business credit card accounts in QuickBooks Online.
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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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The Credit Card Reconciliation Process
Similar to your personal credit card accounts, your business credit card accounts need to be reconciled 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 helps ensure the following:
- Timely notification of discrepancies: If a credit card charge comes through for a different amount than what you authorized, reconciling your accounts helps you catch it a lot sooner.
- Timely notification of any fraudulent transaction: 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.
In addition, reconciling your credit card transactions in QuickBooks helps ensure every transaction is noted in your books. This helps keep your financial statements like your profit & loss and balance sheet up to date.
How to Perform QuickBooks Credit Card Reconciliation
Before you follow the steps to reconcile, be sure you have your statement for the credit card that you want to reconcile handy. We refer to the credit card statement often during this process.
Here are the steps to reconcile a business credit card account in QuickBooks Online:
1. Navigate to the QuickBooks Credit Card Reconciliation Tool
From the homepage, click on the gear icon to the left of your company name. In the Tools column, select Reconcile as indicated below.
2. Select the Credit Card Account to Reconcile
In the next screen, select the credit card account you want to reconcile, and then enter the ending credit card balance and the ending statement date.
Using your credit card statement, complete the fields as indicated below:
A detailed explanation of the information required is as follows:
- Account: Select the credit card account you would like to reconcile from the drop down.
- Beginning balance: QuickBooks automatically populates this field with the ending balance from the previous month. Tip: Double-check that the beginning balance matches the beginning balance on your credit card statement. If it does not, you should see a notification similar to the one below.
- Click on the “We can help you fix it” link and follow the instructions to resolve the difference before you reconcile the current month:
- Ending balance: Enter the ending balance that appears on your credit card statement in this field.
- Ending date: Enter the ending date of your credit card statement in this field.
- Start reconciling: When you are ready, click the Start reconciling button to go to the next step.
3. Start Matching Credit Card Transactions
Matching credit card transactions involves making sure that everything that appears on your credit card statement has been recorded in QuickBooks.
Below you is a screenshot of the new & improved reconciliation tool along with a brief overview:
Below is a detailed description of the information shown on the matching credit card transactions screen pictured above:
- Statement ending balance: The amount that you entered from your credit card statement in step two appears in this field. Tip: Be sure to double-check this because it will cause you to be out of balance if it is incorrect.
- Beginning balance: As discussed previously, this is the ending balance from last month’s statement. QuickBooks populates this field for you.
- Cleared balance: As you start to reconcile each item, the cleared balance amount changes depending on whether you have selected a charge or a payment transaction.
- Charges: This amount increases as you select charges to reconcile from the detailed section below.
- Payments: This amount increases as you select payments to reconcile from the detailed section below.
- Difference: This field is automatically calculated. It is the difference between your statement balance and the cleared balance. The goal is to get to a difference of zero.
- Transactions: In this section, you see all of the charges and payments that have been recorded in QuickBooks as of your statement ending date. You can filter this section to just show charges, payments or all by clicking on each of the tabs as indicated in the screenshot above.
If you are new to reconciling, I recommend that you reconcile the area with the least number of transactions first. Your goal is to make sure that every charge and payment listed on the credit card statement is marked as “cleared” in the reconciliation window.
To mark an item as “cleared,” click the radio button to the right of the Payments column as indicated in the screenshot below:
Let’s start with payments first. Once you have marked all of the payments that appear on your credit card statement in this window as cleared, verify that the total payments cleared matches the total payments amount on your credit card statement.
In the example below, the total payments on our credit card statement ($1374.06) match the total payments we have “cleared” in QuickBooks ($1374.06). If it does, you can move onto charges. However, if your payments do not match, head over to the section for troubleshooting tips on how to fix the out of balance.
Sample Credit Card Statement
Payments Cleared in QuickBooks
Repeat the same steps for all charges. Make sure that the total charges cleared in QuickBooks matches your credit card statement.
In the example below, total charges on our credit card statement ($3505.79) match the total charges we have “cleared” in QuickBooks ($3505.79). If it does, you can move onto the next step; however, if your charges are not in balance, head over to our troubleshooting section for tips on how to resolve the out of balance.
Sample Credit Card Statement
Charges Cleared in QuickBooks
4. Confirm $0.00 Difference
Once all charges and payments match the credit card statement, you should have a difference of $0.00 as indicated in the screenshot below.
Behind the scenes, QuickBooks marks all of the charges and payments that have been reconciled as cleared. Clicking the Finish now button generates the credit card reconciliation report, which we look at next.
5. Review & Save Credit Card Reconciliation Report
Below is a snapshot of the credit card reconciliation report that QuickBooks generates after click Finish now:
Tip #1: It’s important that you save all credit card reconciliation reports for every credit card account. You can create a folder for each account to keep these reports in. For more tips on how to organize key financial reports and documents, check out our Small Business Bookkeeping Guide.
Tip #2: Bank/credit card reconciliation reports are one of the Top five reports that auditors request from you during an audit. In my experience as an auditor, if you are not able to provide these reports the audit may not go well for you.
8 Troubleshooting Tips for QuickBooks Credit Card Reconciliation
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:
- Narrow the search down to the transaction type: Determine whether the out of balance is a credit card charge or a payment.
- Tackle one transaction type at a time: If you are out of balance for both credit card charges and payments, tackle them separately. In other words, balance credit card charges first and then move onto payments and credits or vice versa.
- Search for a transaction for the dollar amount that you are out of balance: If your difference is $50, then look for a matching $50 transaction on your credit card statement.
- Double-check ending balance of credit card: Make sure the ending balance and ending statement date entered in step 2 above is correct.
- Verify all transactions on the bank statement are accounted for: Check to see if there are any transactions in the reconcile window that you did not select. If the transaction is on your credit card statement, then make sure the radio button next to it is selected in QuickBooks.
- Add missing transactions to QuickBooks: If you find a transaction on the credit card statement that is not in QuickBooks, you need to enter it into QuickBooks. To do so, just follow the instructions below:
- Enter a missing charge as you normally would. In our lesson on entering business credit card transactions, we walk you through each step of how to manually enter credit card transactions in QuickBooks.
- If the missing transaction is a payment, enter it as you normally would. Our entering credit card refunds lesson has step-by-step instructions on how to enter credits in QuickBooks.
- Take a break. If you’ve been at it for a while and you need a break, clicking the Finish Later button to save the work you have completed so 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.
- Don’t click the reconcile button if you are not in balance: 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; it 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 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.
How Credit Card Reconciliations Impact Financial Statements
Reconciling your credit card accounts does not change your financial statements. However, in the credit card register, reconciled charges and payments are 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 because 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 listed in office supplies), but you do not want to make any changes to the date or the amount. Doing so can cause your financial statements to be inaccurate and you will no longer be in balance with your credit card company.
Frequently Asked Questions (FAQs) About QuickBooks Credit Card Reconciliation
We have included answers to the most frequently asked questions about QuickBooks credit card reconciliation below.
The most frequently asked questions about QuickBooks credit card reconciliation include:
What is bank and credit card reconciliation?
Bank and credit card reconciliation is the process of comparing the transactions that appear on your bank and credit card statements to what has been recorded in QuickBooks. Bank and credit card reconciliation should be done on a monthly basis to ensure your financial records are always up-to-date.
What is merchant reconciliation?
Merchant account reconciliation is the process of making sure all processed credit card payments have been deposited into your bank account. Similar to business credit card reconciliation, merchant reconciliation should be completed on a monthly basis. Business owners using Intuit Payments can learn more in our article about managing credit card sales with Intuit merchant services.
How do I reconcile a credit card in QuickBooks?
Follow the steps below to reconcile a credit card in QuickBooks Online:
- From the homepage, click on the gear icon
- In the Tools column, select Reconcile
- Select the credit card account from the dropdown list
- Enter the ending balance and ending statement date from your credit card statement
- Match all transactions that appear on your credit card statement to QuickBooks
- Make sure your difference is zero
- Click the Finish button
- Review and save reconciliation reports
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.
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