How to Reconcile in QuickBooks: A Start-To-Finish Guide

Posted at May 5, 2020 » By : » Categories : Accounting, Payroll, & Taxes »
how to reconcile in QuickBooks

Are you one of the more than two million people who use QuickBooks for their business’ financial and operational needs? If so, you know that the tool is robust enough to handle large-scale transactions but nimble enough to support fledgling startups. To get the most use out of your software investment, it pays to know your way around all of its features. One of those is the QuickBooks reconciliation feature. Knowing how to reconcile in QuickBooks can help keep your account data as accurate and up-to-date as possible.

Not sure how to reconcile in QuickBooks? Read on to learn the step-by-step process to follow!

What is Account Reconciliation?

Have you ever balanced your checkbook against your online account statement? While the former might be nearing obscurity as digital banking takes over, it’s a step that most of us are familiar with performing.

Business account reconciliation is akin to this process.

In short, it’s the process of making sure the transactions entered into your QuickBooks Online software match those entered in your banking and credit card statements.

Depending on when you review your statements, this step should be done as often as possible to make sure your financial reports are correct. It also helps ensure that your end-of-the-year tax documents are accurate.

At the very least, a monthly review is necessary. If your online business accounts are linked with your QuickBooks Online software, the step is relatively simple and straightforward.

How to Reconcile in QuickBooks Online

Ready to start reconciling your accounts in QuickBooks? Let’s go over the steps to take. Note that these instructions apply to users with QuickBooks Online. Account reconciliation in the desktop version of QuickBooks follows a slightly different process.

Step 1: Open QuickBooks

First, open QuickBooks Online. On the front-page Navigation Bar, select the “Accounting” tab. Then, click the sub-tab labeled “Reconcile”.

Choose which account you want to reconcile first. It’s usually easiest to start with your checking account. From there, you can work your way through each account that you’ve integrated into your QuickBooks platform.

Step 2: Enter Your Dates

You don’t want to review your company’s entire financial history every time you go to reconcile your accounts. You need to narrow it down.

Once you’ve selected the account to review, check your latest account statement and find these two data points:

  • The ending balance
  • The ending date

You’ll see two QuickBooks data fields requesting this information. Enter it and click “Start reconciling”. This is where it pays to have paper copies of all of your account statements saved in one place!

Step 3: Analyze Line Items

Next, it’s time for the most laborious, but important, part.

With your hard copy account statement in front of you and your QuickBooks Online tab open, you’ll double-check each line on the account. Note that as you do this, you’ll need to ensure that two conditions are true:

  • The individual line items on QuickBooks match your account statement
  • The aggregate totals on QuickBooks match your account statement

If you follow these steps, the difference between QuickBooks and your physical statement should eventually equal $0.00.

What if I Don’t Get $0.00 and I’m Unsure How to Reconcile in QuickBooks?

Frustrated because you can’t get your accounts to reconcile to $0.00? It’s OK! You might have minimal ending balance variations, and that’s normal.

A few of the reasons why your numbers might not match exactly include:

  • Bank service charges
  • Checks entered into QuickBooks that remain uncleared by your bank
  • Transactions posted to your bank but not entered into QuickBooks

One way to avoid these issues is to record transactions into QuickBooks as they occur in real-time, rather than anticipating them proactively or adding them retroactively. You can also keep a closer eye on your records if you learn how to reconcile in QuickBooks on a more frequent basis.

Sometimes, the difference is as marginal as sales tax. Other times, it can be a major gap. Before you call your accountant or grow too concerned, check to see if the common culprits above could be causing the imbalance.

After I Think I Know How to Reconcile in QuickBooks, What if My Opening Balance is Different?

Your accounts reconciled perfectly last month. Why are you now noticing a different opening balance when you’re ready to analyze them now?

When this happens, it means a discrepancy has occurred. In most cases, these can be attributed to the following two issues:

  • You’ve modified, deleted or added to a previously reconciled transaction
  • You’ve made adjustments to your account reconciliation (e.g. in your journal entries)

Not sure how to pinpoint these changes? QuickBooks Online allows you to run a Reconciliation Discrepancy Report to reveal any changes made to your data since the last reconciliation.

You can also run a Missing Checks Report as well as a more in-depth Transaction Detail Report. If you find that a field has been changed, track who made the change and initiate a conversation.

While there might be a valid reason for the adjustment, you need to understand why it was made and exactly what was modified so you can update your accounts accordingly.

Account Reconciliation Ensures Financial Stability

Keeping a close eye on your reports is a critical step for any business owner. While resources such as QuickBooks take much of the legwork out of the process, it’s important not to let automation take the place of managerial oversight.

When you know how to reconcile in QuickBooks, you can use the software to double-check that all of your financial records are in order. This way, you can use the digital tools at your disposal to augment, not completely replace, your accounting function.

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