<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1577708692552779&amp;ev=PageView&amp;noscript=1">

QuickBooks Tips Blog

QuickBooks Bank Reconciliation Example Of Procedures

Posted by Matt Roberge on Oct 28, 2013 7:00:00 AM

The more small business bookkeeping consulting we do the more I stand by this motto: reconciling QuickBooks is the most important thing you can do from a bookkeeping standpoint.  Many small business owners use our QuickBooks support services to learn more about using QuickBooks and properly handling their small business bookkeeping.  When I run through a QuickBooks bank reconciliation example with a new client it seems to go well.  When I send that same client to do a QuickBooks bank reconciliation on their own it rarely gets done correctly the first time.  QuickBooks is like any other software, you need to learn how to use it properly and it takes time.  As you learn QuickBooks you are going to make mistakes along the way and eventually learn the correct way to use QuickBooks for your business.  I will run you through a QuickBooks bank reconciliation example and give you some advice on handling it correctly.   

Don't Be Intimidated

First, let me say don't be intimidated by your bookkeeping or QuickBooks.  I know many people do find QuickBooks and accounting intimidating but that is because it is something new.  I always tell people the beautiful thing about bookkeeping is that it can be done whenever and I can always fix mistakes.  Just don't let your bookkeeping fall so far behind that it becomes costly to catch up and fix your mistakes.  Many people get intimidated by the word reconciling; I know it sounds painful.  Reconciling is just a fancy word for balancing the checkbook so feel free to call it whatever you like.  Don't be intimidated by your bookkeeping and find help before you start making mistakes. 

Go Line By Line

The most basic advice I can give you is to go line by line comparing your bank statements to your QuickBooks file.  Anyone that tells you that there is some magic formula is lying because in order to reconcile you need to review your bank activity and mark off those transactions as reconciled in QuickBooks.


As you can see in my screenshot example all I have done is split the computer screen between QuickBooks and a bank statement.  As you review each line on your bank statement simply put a check mark next to that in QuickBooks.  When you get the "Difference" located in the lower right hand corner to equal zero then the account is reconciled.  There are no short cuts and you can't reconcile without the difference being zero.

Downloading Bank Information Helps

Downloading banking information into QuickBooks can save you time and also increase the efficiency of your bank reconciliations.  While downloading in QuickBooks is great for some companies it is not for others.  If you only go off of downloaded information you are only collecting the data that has cleared your bank account.  What about all of the outstanding checks, deposits and other payments? An example is if you cut a check to someone towards the end of the month they may not cash it right away.  If that is the case and your bank statement closes at the end of the month you would need to leave that check uncleared if it did not clear the bank yet.  Many businesses use the QuickBooks download feature as it allows them to easily reconcile their accounts, just be aware of the drawbacks.

Use Ask My Accountant

I see many businesses avoid their reconciliation because they don't know how to code a deposit or payment that showed up on their bank statement.  It is a huge mistake to avoid an unknown transaction simply because you don't know what it is or how to code it.  Don't ever let a questionable transaction stand in your way of reconciling.  All you need to do is code any unknown transactions to the ask my accountant account in QuickBooks.  Using the account called ask my accountant account does two very important things for you.  First, it allows you to reconcile, which is the most important thing you can do for your business's bookkeeping.  Secondly, it keeps all of those questionable transactions organized in one account.  When you have time to review the charges with the owner and accountant then you can easily get all of those transactions coded. 

Reconcile All Of Your Accounts

Another big mistake I see QuickBooks users make is to not reconcile all of the accounts that are possible.  Most people will reconcile their bank account and stop there.  It is important to reconcile all of your accounts not just your bank accounts.  Any account that you get a statement for that has a beginning and ending date with a beginning and ending balance can and should be reconciled.  Examples of accounts that can be reconciled are bank accounts, credit cards, loans, lines of credit and payroll liabilities.  Reconciling payroll liability accounts and payroll advances are items that often get overlooked by clients.  It is important to reconcile these accounts to $0.00 as it just a simple in and out of the account.  As liabilities and advances are increased they then need to be decreased once payroll taxes are paid and advances are collected.   

Consistent Reconciling Is Crucial

It is important to stay consistent with reconciling QuickBooks but most people don't. I mean seriously can you blame them? Is there anything less sexy in business than sitting down to reconcile your bookkeeping? Small businesses are usually really good at pushing bookkeeping to the back burner because of all the other tasks that they consider more important.  If you stay consistent and set up a normal routine for reconciling your QuickBooks file then you will be doing better than most.  Let's face it stuff comes up and it is easy to put bookkeeping off because in reality it can be done at any time.  Try setting aside some time out of normal business hours to get your books reconciled and stick to the routine.


Run Financial Reports

The last mistake I see small businesses make is to reconcile their accounts and just stop.  The owner is usually notified that the books are balanced and then nothing else is done.  The whole point of reconciling your accounts is to produce accurate financial statements.  If you are going to go through the process of reconciling your accounts then you should take advantage of your business financial reporting.  Creating a set of financial reports that you review on a regular basis is important to the success of your business.  Financial reporting and analysis is crucial to keeping your business on track.  However, the financial reports you are reviewing are only relevant if you are keeping accurate books that are reconciled on a consistent basis.  

Don't let your QuickBooks account reconciliations fall behind because you are intimidated.  Get some basic bookkeeping and QuickBooks training and support to make sure your reconciliations get done on a consistent basis.  Additionally make sure you take advantage of financial reporting for your small business, which is the whole point of reconciling.  Your small business bookkeeping can do much more than file your taxes, it can be a tool that you can use to help run and grown your business.

Need Help with Quickbooks, but want to do it yourself? Try Quickbooks remote training today!

Topics: QuickBooks, QuickBooks Tips Blog, QuickBooks Blog, QuickBooks Reconciliation, bank reconciliation, Reconciling QuickBooks