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How to reconcile your bank accounts

by Lauretta Finis

3 min read

When you enter transactions into your QuickBooks Online file, such as expenses, making payments against bills, deposits, and payments against your customer invoices, each of the transactions need to be checked and matched to bank records. This process is called reconciling. This should be done for all your bank accounts and credit card accounts that are linked to your QuickBooks Online file on a monthly basis.

The transactions in QuickBooks Online should mirror your business bank account. This is a significant part of the process of bookkeeping. If you do not take the time to reconcile correctly you may find that you have missed some very important transactions that are not entered or transactions that are entered twice. These errors could cause serious discrepancies in your file, effecting:

  • Financials: How accurate will they be, what is the performance of your business and how can you make important business decisions?
  • Your BAS: You may have to pay more in GST or, if you have underestimated the transactions, you might owe more to the ATO
  • Tax return: When your accountant process’s your tax returns at the end of the financial year how accurate will this be? You may have to pay more in tax

One of QuickBooks Online features is the online banking feed. This will assist with accuracy and ensures that all transactions are accounted for. See our previous blogs on online banking and bank rules.

One of my clients who is in the construction industry would try to reconcile his bank accounts and credit card manually. Prior to using and becoming familiar with online banking feeds, at most end of quarters he would arrive to my office with unfinished and unreconciled accounts. We would sit there for hours to resolve the issues, missing transactions and incorrect amounts being entered. This would take a considerable amount of his and my time. I trained my client to allocate the bank feeds correctly and he now reconciles his bank accounts in less than two minutes. Reconciling correctly saves him valuable time and money.

Let’s look at this process. Once all of your online banking feed transactions have been matched and added for the month, this is the next step:

From the Company gear icon (located top upper corner) > Tools > Reconcile.

Reconcilation 1

In the Reconcile window open the drop down menu. Choose your Account > Choose the bank account that you are reconciling > Click Reconcile Now.

Rec 2

Enter in your end date > Statement Ending Date and balance > Ending Balance from your bank statement > Click OK.

Rec 3

In this particular example below let’s look at reconciling the account called Westpac Chq Acc – 246814. The bank statement end date is 31st August 2015 and has an ending balance of $45645.81.

In the Reconcile window choose this account from the drop down menu. We can see that the 31/07/15 was the last date this bank account was reconciled > Click the date to see the report > Click Reconcile Now.

Rec 4

Enter in the Statement Ending Date 31/08/2015 and Ending Balance $45645.81 > Click OK.

Rec 5

  1. The transactions highlighted in yellow with the Green paper icon are transactions that have come across from the online banking feeds. As you can see these are ticked and highlighted
  2. These transactions have been entered manually so you need to investigate to see if these belong here. Are they correct? Have they doubled up?
  3. Beginning balance of bank statement
  4. Statement Ending balance of bank statement
  5. Difference: $0.00 balance means this bank account has reconciled because the ticked transactions are correct
  6. Cancel: If you need to cancel out of the reconcile window this will lose all transactions you have ticked
  7. Finish Later: Click this button if you need to come back later and complete. You will not lose any transactions that you have ticked
  8. Finish Now: Done! Bank reconciled – congratulations!
  9. Edit information from Statement: Edit here if you have entered a balance or date incorrectly

Rec 6

Reconcile Any Control Account

We’ve seen how easy it is to reconcile a bank account as long as the correct transactions have been entered, but have you thought of running the reconcile process for any other control account? Try your Petty Cash account, Payroll Clearing account, Superannuation liability account or Loan accounts.

Any account in your balance sheet can be reconciled in the above manner to ensure the accuracy of your file is maintained.

Rec7

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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