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QuickBooks Tips Blog

Chart Of Accounts Reconciliations In QuickBooks

Posted by Joe Mazur on Jan 30, 2013 7:00:00 AM

Although I'm not a big fan of over used business clichés, I tend to use some from time to time.  I sometimes laugh when I hear 'low hanging fruit' or 'think outside the box' or even the hall of famer 'shift the paradigm.'  The cliché I use when talking about accounts reconciliations in QuickBooks is 'keep all your ducks in a row.'  I first heard the term 10+ years ago from one of my all time favorite Front Desk Managers, Kristen Collins.  She managed a front desk crew that needed to count cash and reconcile guest accounts multiple times a day.  She knew that if it didn't happen consistently, then it would snowball out of control and possible revenue could be lost forever.  Even she would laugh when she used the term because she knew it was cheesy, but she was right.  Not putting a system in place to regularly reconcile your accounts can lead to a loss in revenue and a drop in profits and inaccurate financial reporting.   

There are the obvious accounts to reconcile in QuickBooks, but what about the not so obvious accounts? There are many account types that can be reconciled beyond the obvious bank accounts.  These account types are; credit cards, other current assets, fixed assets, other current liability, long term liability, and equity.  Let's look beyond the checking and savings account and talk about credit cards, payroll liabilities, loans, lines of credits, commission accounts, and even 401k withholding accounts.

Go Big  

Most business owners understand the company credit card needs to be put on the books and reconciled each time a statement it produced.  However, most credit cards don't close at month end.  In order to close out a month, I like to do a 'soft reconcile' of the account.  Meaning, go through the reconciliation process with an end date that ties to the statement, then enter the balance as of month end and tie the book balance to the online balance.  Instead of clicking 'Reconcile Now' click 'Leave.'  This will show that the actual balance as of month end has been verified.

Other current assets and fixed assets usually have little activity depending on your company's industry.  Due to the low activity, the reconciliation process tends to get overlooked.  However, if you are an industry leading real estate property firm, then you may need to reconcile these accounts monthly, if not bi-monthly.  Booking properties to the OCA account allows you to accurately track costs associated with that asset and you can know if you are meeting your investment goals.

Both Other Current Liabilities and Long Term Liabilities can be a headache if they aren't reconciled.  Payroll liabilities should almost always have a zero balance, if not, then expenses might be under reported.  If your business pays commission, then you will want to have that number reconciled to the penny so you don't get blindsided by a large payout to a rep or dealer.  This is why using your bank statement as your bookkeeping system can lead to a disaster.   Seeing an accurate liability on the Balance Sheet can truly help with budgeting and forecasting, especially from a Cash Flow standpoint.

If your company offers a 401k or IRA program, your liability account associated with this better be zero or your could run into some trouble with Uncle Sam down the road.  I'm surprised when I work with businesses that don't automate this process.  As money with withheld from a paycheck, it needs to be distributed to the corresponding 401k or IRA immediately.  

Loans and Lines Of Credit need reconciling each period to capture Interest Expense.  Not doing so will under report expenses and inflate profits.  Again, this greatly impacts your financial reporting tools.


Avoid The Headache

Get your bookkeeping system set up and make sure the procedures are put in place to keep it maintained on a monthly basis.  Not staying on accounts reconciliations in QuickBooks can cause a decent amount of unneeded stress.  Feel free to reach out to find out how we can customize your company's process to make your life easier and to see you bottom line improve.   Next thing you know, you will proudly be using the proverb that 'all my ducks are in a row.'



Topics: QuickBooks, QuickBooks Advisor, QuickBooks Tips Blog, Accounting Reconciliation, Efficiently Using QuickBooks