As a business owner, you may not have as much time as you would like to deal with your business accounting books. QuickBooks is a great software program that makes accounting so much easier – it’s about time. One of the best functions of QuickBooks is to help with account reconciliation. In this article we discuss reconciliation and some issues QuickBooks users encounter.
What is A Reconciliation? Why Is It Important?
Reconciliation is the process of matching transactions on your bank statement with those in your accounting books. This is commonly done on a weekly or monthly basis.
A reconciliation is important for many reasons! The biggest reason is because you need your accounting records to be accurate. Inaccurate books can lead to many mistakes…like incorrect tax payments and error filled forecasts and budgets!
Timely reconciliation can help with preventing fraud, like employees siphoning company funds as their own.
For example, suppose you had an employee take $500 in company cash for himself and did not record this in the accounting books. Your bank statement will show the transaction, but there is a higher chance it will go unnoticed if you don’t compare the bank statement with official company records.
This is going to be especially important for businesses that handle cash. If you allow employees to make purchases or allows employees access to the business bank account, this should be top of mind.
General Error Detection
In general – reconciling your bank statement with accounting books is a great way to detect errors. You will be much more likely to detect duplicate transactions or missing transactions. You will also be able to detect transactions that are unrecognized if you perform regular reconciliations.
Common Reconciliation Issues
Incorrect Beginning Balance
The first common reconciliation issue QuickBooks users find is that their starting balance in QuickBooks doesn’t match the starting balance for the period on their bank statement.
For example, if your January 1st bank statement reads $10,000 but your January 1st QuickBooks statement reads $9,252, there is an issue with your QuickBooks records.
This is often due to past transactions, and to fix the problem you can run a Reconciliation Discrepancy Report.
This report gives you a list of transactions that were modified and deleted. You can comb through to figure out where the problem is. QuickBooks makes this process easy by providing a link next to the mismatched balances that reads “We Can Help You Fix This.”
Another common reconciliation issue is timing. This happens when you send in or receive a payment on one day. Then on another day the transaction “clears” or shows up on your bank statement.
This is a bigger problem for transactions that happen at the end of the month!
The best way to fix this is to leave the transaction as is in Quickbooks until it shows up on your bank statement. After you confirm it, you can then mark it as “cleared” in QuickBooks.
Ending Balances Do Not Match
Similar to the problem with the beginning balances we just talked about, sometimes your period’s ending balances will not match.
For example, let’s say you start the month with a $10,000 balance both in QuickBooks and your bank statement. But end the month with $15,000 in QuickBooks and $14,500 in your bank. Something went wrong during your reconciliation.
The most common way this happens is by simply overlooking a transaction or adding a transaction that did not exist. QuickBooks does a good job of giving you a list of transactions that are not present in both the bank statement and QuickBooks. Unfortunately sometimes the amounts may not match up.
The best way to fix this issue is to go through each transaction until the discrepancy is found.
Duplicate or Adjusted Payments
Duplicate or adjusted payments are also common reconciliation issues with QuickBooks. Duplicate payments are just like they sound, either the bank or QuickBooks duplicate a transaction. This is easy to fix and QuickBooks will highlight possible duplicate transactions when you start a reconciliation!
Adjusted transactions can be harder to solve. These are “forced” adjustments that QuickBooks users input manually. To find adjusted transactions you will need to run the reconciliation discrepancy report we talked about earlier. Then compare the adjusted transactions with your bank statement.
Once you find the transaction causing the issue, QuickBooks will guide you how to adjust or correct the transaction!
I hope this talk about QuickBooks reconciliation issues has been helpful. These are just a few of the common issues you can encounter when performing a reconciliation. Every business is different! If you are finding you are running into reconciliation issues month after month, it may be time to outsource!
For more information on how we can help improve your bookkeeping, check out our article on why keeping your bookkeeping current is SO important!