How to Reconcile Your Bank Account in QuickBooks

A major part of good bookkeeping is periodically reviewing the recorded numbers in your received bank statements and the numbers you’ve put into your accounting software, such as QuickBooks. Even the most thorough and accurate accountants or business owners will occasionally make mistakes; reconciliation helps you to catch mistakes before they go for too long and potentially cost your business money. But although QuickBooks is fairly user-friendly compared to most accounting software, it doesn't hold your hand through the account reconciliation process. So it's tough to know how to reconcile your bank account in QuickBooks if you haven't done it before. Below, you’ll find a detailed breakdown of account reconciliation using QuickBooks’s accounting platforms. Let’s begin.

What is Account Reconciliation? Why Do It?

When you reconcile your accounts, you typically use business accounting software like QuickBooks to compare business transactions and balances with your bank statements, which should also have a list of transactions and balances. In simpler terms, reconciling your accounts involves correcting any errors in your own bookkeeping or contacting the bank to correct errors on their part. By making sure that the recorded balances in your business and from your bank matchup, you’ll:

• Validate all of the entered data, avoiding extra charges or fees that should not be incurred
• Confirm the accuracy of financial statements. This is rare, but it does happen and can occasionally cost hundreds of dollars (or more)
• File correct tax returns, potentially increasing how much money you get back at the end of every year (or limiting how much you owe the government)
• Monitor cash flow more accurately
• Identify any major irregularities
• Prevent employees or other individuals from stealing from your company, either intentionally or not

Any small business looking to tighten up finances should reconcile its accounts regularly. Fortunately, you don't have to do this by hand if you have a version of QuickBooks (which comes in both online and desktop versions).

Reconciling Your Bank Accounts in QuickBooks

Although QuickBooks has several useful tutorials, it can be tough to know how to reconcile your bank accounts quickly and easily even after flipping through many screens. Let’s break down the bank account reconciliation process in detail now. Note that this process is broadly the same whether you use QuickBooks Online or Desktop besides a few minor differences (as seen below).

Step One

To get the bank account reconciliation process, make sure that you back up your company files in case you make errors or lose the files you're working on. If you fail to do this, deleting the bank records you’ve worked on could lead to a bookkeeping disaster. Furthermore, if you are reviewing and reconciling one of your accounts for the first time, be sure to review the opening balance. This starts you off on the right foot and ensures that you don’t miss something obvious in the process. When you review the opening balance, make sure that it matches the balance in your real-life bank account on the day you chose to use QuickBooks to track your transactions. What if you forgot to enter an opening balance in QuickBooks? That’s okay – you can use QuickBooks’s tools to enter an opening balance later down the road.

Step Two

After preparing and reviewing the opening balance, go through all the transactions for the statement period you want to reconcile. Again, this just ensures that you input accurate data and you don’t miss something that can throw off your reconciliation later in the process. What if you have one or more transactions that are recorded but haven’t cleared your bank, and thus aren’t on your statement? Wait to do the reconciliation until you can enter these accurately.

Step Three

Now it’s time to start reconciling your accounts . Take your monthly bank or credit card statement(s) and be sure to only do one at a time. Your accounts should be connected to online banking if possible. The below steps will break down the exact procedure you should use depending on whether you’re using QuickBooks Online or Desktop.

QuickBooks Online

In QuickBooks Online:

1. Click “Settings” and “Reconcile”
2. Note that if you are reconciling with QuickBooks for the first time, click “Get Started” to begin the process instead
3. Go to the "Account" drop-down menu and choose the account you want to reconcile. Double-check that the account listed is the same one you have on your statement (which should be on the desk in front of you)
4. Next, review your beginning balance. Double-check that the beginning balance in QuickBooks is the exact same as the one you have on your statement
5. If the beginning balance doesn’t match, you can correct it by selecting the opening balance entry, which will expand its view
6. Click the “Deposit” column and edit the balance so it matches the bank records you have on file
7. Then enter the ending balance and ending date on your statement. Note that some banks will call the ending balance the “new balance” instead
8. If applicable, look for the “last statement ending date”, which is the candidate of your last bank account reconciliation
9. If you’re ready to move on, click “Start Reconciling”

QuickBooks Desktop

If you’re using QuickBooks Desktop:

1. Go to “Banking”, then “Reconcile”
2. Go to the account field and select the credit card or bank account you want to reconcile
3. Your "statement balance" should already be filled in, although you may need to change it to match your bank statement
4. QuickBooks typically enters the beginning balance for you. But you can adjust this if necessary using the process described above
5. Be sure to enter the ending balance as stated on your bank statement
6. Then enter the “Service Charge” and “Interest Earned” based on your bank statements
7. Review all of the information and, if it’s correct, click “Continue”

Step Four

After completing the above steps with your version of QuickBooks, you can now manually compare the transactions on your statement with your QuickBooks files. Be sure to go over every line item one by one. This can be time-consuming, so set aside enough time for this process so you can be thorough. Don’t just look at the line item amounts included in your statements; you should also make sure you have the right dates on file for transactions as well, particularly if they are for big purchases or sales.

Want to Review Past Reconciliations?

It’s often a good idea to review the past account reconciliations you performed, especially if you are doing an in-depth audit or if you suspect that you missed something in the past. Fortunately, QuickBooks allows you to do this quickly and easily.

1. Navigate to the “Accounting” menu
2. Click “Reconcile”
3. Click “History By Account”. This will produce a drop-down menu
4. Choose the account and date range you want to review. You can then use QuickBooks to review the information on your computer screen. You can alternatively print or export your reports if you need to share them with an auditor or accountant or if you prefer to do your review by hand

What about editing past reconciliations? QuickBooks allows you to do this as well, but you should be careful. If you make sweeping changes, you may unbalance your accounts and lead to bookkeeping disasters. Note that any edits will also affect the beginning balance for your next reconciliation.

Best Practices for Account Reconciliation

Going through your records and bank account statements can be time-consuming. But you'll make mistakes and waste time if you don't keep these best practices in mind:

• Use a highlighter or marker to catch any errors on paper, as well as revisit them easily later
• Do your reconciliation when you are awake and focused, not at the end of the day when you don’t have a lot of energy
• Consider having multiple people reconcile accounts (if they are trusted in your organization). Several sets of eyes may be able to catch errors better than a single pair
• Never let errors go. Even if you catch something small, it can compound into a larger accounting error over time
• Set a specific date and time in which to reconcile your accounts every month . This will help to stamp out problems early and prevent you from forgetting to do this crucial bookkeeping task

Summary

As you can see, you’ll be able to reconcile bank and credit card accounts using QuickBooks no matter which version of the software you have on hand. But it’s important to know where to navigate to get the process started and how to do so correctly. Need more advice about how to use QuickBooks to its maximum extent? Or want to know about helpful business tools such as loans ? Either way, Seek Capital is here to help. Contact our financial experts today to see what we can do to boost your business! Sources: Why you need to do a bank reconciliation every month | QuickBooks How Do I Reconcile a Bank Statement? Money & Debt | Chron Small Business Bank Reconciliation Statement Definition | Investopedia