Bank reconciliations are the first steps to complete when it comes to accounting for your business. It is crucial that all the cash on hand, money being received and payments going out are being accounted for in your books. Bank reconciliations are the core of bookkeeping services that accountants provide.
Thankfully with the help of accounting software such as QuickBooks Online and online banking, bank reconciliations have become easier to do even on a daily basis. Here’s a step by step general guide to help you get started on your bank reconciliation in QuickBooks.
Step 1: Access Bank Records
We recommend creating an online banking account to have the most convenient and instant access to your bank records. Through online banking, you can link your account to most accounting software so the transactions upload directly to your software or your bank statement can be downloaded in different versions compatible for manual uploads. Not to mention it’s Eco-friendly. Also, enabling us to perform efficient bank reconciliations on a timely basis.
Step 2: Access Accounting Records
For bank reconciliations, we highly recommend linking your online bank account to have instant and efficient access to your transactions. By directly linking your bank account, accounting software such as QuickBooks can recognize repeated transactions over time and suggest journal entry classifications for you.
Step 3: Navigate to the Reconcile Page
Now we’re going to begin our bank reconciliation. Click on the Gear button, then “Tools” and “Reconcile”. Another method is to click on “Accounting” and then “Reconcile”.
Step 4: Select an Account to Reconcile
For your business, be sure to link all accounts associated including your business checking account and all your business credit card accounts. It is important to reconcile each account. What we like best about QuickBooks is that you can classify the payments between the accounts, such as credit card bills, as transfers.
Step 5: Enter Statement Information
For bank reconciliations, there are three critical fields you’ll want to make sure you have your bank statement on hand for: Beginning Balance, Ending Balance and Ending Date. Ending date should be the month end of the month you are trying to close out and that your bank statement is dated for.
Step 6: Match and Clear Transactions
Once again you’ll need your bank statement handy to match and check off these transactions. As you label these transactions and clear them, the difference will slowly be brought down to zero – which means you have completed checking all transactions.
If you aren’t sure how to classify each transaction, be sure to ask a professional or an expert at Founder’s CPA to assist with your bank reconciliation. It’s best to label each transaction with professional accounting knowledge so that you can reap the maximum advantages such as adding deductions to your tax return.
Tip: Apply Filters So Transactions Are Easier to Find
Once you’ve become more familiar with reconciliation process and your common transactions, we recommend using filters to distinguish between payments and deposits. If you’d like to take it a step further, utilize QuickBooks's feature in creating rules. With rules, QuickBooks recognizes these transactions and classifies them for you. The most useful practice is to apply these rules to the most common and simple transactions. We love this feature because it saves you time by having to reconcile less records each month.
Step 7: Continue Clearing Transactions Until the “Difference” Field Is Zero
Ultimately your goal is to clear all the transactions and have it matched exactly to your bank statement. Once you’ve reached this point, you’re all set until next month!
Tip: Use the Discrepancy Report to narrow down and investigate differences
To see what the difference is you can access the discrepancy report through the reconciliation page or go to Reports, under For My Accountant, you’ll find Reconciliation reports. If there are any discrepancies outstanding, you’ll be able to access the discrepancy report through there.
Some transactions to look out for that can mess up a reconciliation or a previous reconciliation. Transactions that could be contributing to the differences are any transactions that have their date changed, or any transaction that was previously reconciled and is now voided or deleted.
Tip: Outsource your bookkeeping services
We believe in spending your time efficiently and wisely. We recommend leaving the bookkeeping and accounting services to our experts here at Founder’s CPA. We can maximize your tax savings and benefits through our accounting solutions. Find out if you’re ready to outsource your services by reading this article, “Startup Founders – When to Outsource Your Bookkeeping”.
