You should reconcile your bank and credit card accounts at least once a month, when you get your statement. You can start a reconciliation from the home screen of QuickBooks, and should complete it soon after you receive your statement so you can identify and follow up on discrepancies in a timely fashion. (Note: some of the language in this post is specific to bank activity, but the reconciliation function works the same for credit cards. You can select which account you’re reconciling from a dropdown menu in the reconciliation screen.)
When you open the Reconcile window, pick the account you’re working on and you’ll be prompted for a couple details from your bank statement: the closing date of the statement, the ending balance, and whether there are any bank fees or interest that you haven’t already posted. If you enter fees or interest here, QuickBooks will post them for you. Also make sure that the starting balance on the statement matches what’s in QuickBooks, then click Reconcile Now. If the starting balances don’t match, you may need to use the Undo Last Reconciliation button and re-do the prior month before working on the current statement.
The next window will show a list of all the payments and expenses you’ve paid, and another list of deposits you’ve received, which correspond to similar sections of your bank statement. Go through one section at a time, and check off transactions in QuickBooks that have cleared the bank.
In the lower right-hand corner, you’ll see details being tracked for the reconciliation. Statement Ending Balance is the amount you put in when you started. Cleared Balance shows a running total of the payments and deposits you’ve checked off as cleared. Your goal is for Difference to equal zero, when the Cleared Balance equals the Statement Ending Balance. When it does, click Finish Now, and you’ll have the opportunity to open, review, and print 2 reports – a summary and a detail report for the reconciliation. The summary shows totals for expenses and deposits that cleared the bank, and a total of uncleared transactions. The detail report lists every transaction in these categories.
If the Cleared Balance in QuickBooks doesn’t match the ending balance on the bank statement, there are a few possible fixes:
- Double-check that you entered the correct ending balance, and that the starting balance on the statement and in QuickBooks match.
- Check if you transposed digits when you wrote a check or entered a deposit, e.g. you recorded a $32 deposit when you actually deposited $23. If this happened, open the transaction and correct it.
- If the Undeposited Funds account has a balance, you may have used the Receive Payments window, but not posted them in a deposit to finish recording the transaction.
- You may have edited or deleted a transaction that was marked as cleared on a previous reconciliation. In this case, re-enter or edit the transaction back to what it formerly was.
There are a few additional tricks to make reconciliations easier:
- When you’re reconciling, work on one side at a time – deposits or payments/withdrawals. Your bank statement likely has the same sections, so it’s easier to go through each list in order, rather than bouncing between the two.
- If you get stuck, you can unmark all the cleared transactions and start over.
- Hide transactions after the statement’s end date to reduce the number of lines you have to look through. This will also stop you from mistakenly marking something as cleared after the statement period.
- If there are old transactions that haven’t cleared, you may be able to void them. For old checks that didn’t get cashed, follow up with the vendor to confirm if they received it, and reissue it if necessary.
- Any transactions that are voided will have a zero balance. You can mark these as cleared so they don’t take up space in the reconciliation window.
- Keyboard shortcut – use the arrow keys to move up and down the list of transactions, and click the spacebar to mark a transaction as cleared or uncleared.
- If an account has a lot of activity, and you have online banking to review transactions between statements, you can reconcile the account more frequently. This will leave you with fewer transactions to review, making the reconciliation shorter and with fewer potential discrepancies.