Reconciling your Bank Accounts with QuickBooks

Making sure the checking account is reconciled and balanced on a monthly basis is one of the most important bookkeeping tasks that a small business owner needs to complete.  Even if your not doing it yourself,  you need to ask your Bookkeeper or Accountant for a monthly report showing the reconciled balance.

A Bank Reconciliation is a comparison of the general ledger account for your checking account (the check register) with the bank statement sent monthly from your bank. You prepare the bank reconciliation to find any missing items or items not treated correctly in your register. It’s possible you might also find errors the bank has made, though this doesn’t happen very often.

Let’s take a look at some common differences you might find:

Bank Charges and fees: these are charged by the bank for the operation of your bank account you might be charged a fee for balance below the minimum or a charge for a bounced check.

Electronic withdrawals: Quite often you make purchases with your debit card or withdraw money from the ATM that you forget to enter. You might also have automatic payments that occur on a monthly basis (I would suggest setting them up to be entered automatically in QuickBooks when they occur instead of waiting till you receive the bank statement).

Outstanding Checks: These are checks you’ve written that have not yet been cashed by the bank. So they appear in your check register but not on the bank statement

Deposits in Transit: These are usually deposits you’ve made at the end of the month, that are not recorded by the bank at the time of the statement. It’s a timing difference and will show up as being deposited on next month’s statement. Of course it could also be because you recorded a deposit but forgot to actually take it to the bank (OOPS).

QuickBooks makes reconciling your accounts a fairly easy process:

1. From the Banking drop down menu select Reconcile or just select it from your home page. The Begin Reconciliation window opens
2. Select the account you want to reconcile from the Account drop down box.
3. Enter the Statement ending date from the bank statement
4. Verify that the beginning bank balance in QuickBooks is the same as the Beginning balance on the bank statement.
5. Enter the Ending Balance from the bank statement.
6. Enter any service charges and interest received from the bank on the appropriate lines
7. Click continue and the reconcile window opens
8. You’ll now see two columns: one for Checks and Payments and one for Deposits and Other Credits. Place checkmarks next to each entry that also appears on the bank statement. Make sure the amounts match exactly. I normally highlight the bank statement for each entry that matches. If you need to change an amount, verify it and then double click the entry to make changes.
9. Next you’ll need to enter the debits and electronic withdrawals we discussed above that you haven’t entered yet. These are normally listed separately on your bank statement. Also verify and enter any checks or deposits that are on your bank statement but not entered in QuickBooks (hopefully you don’t have any of these).
10. If you’ve entered everything correctly the Difference (bottom right corner) should be showing zero. If so, click reconcile now, and print out a bank reconciliation report. I usually print out a detailed report and attach it to the bank statement.

If for some reason the Difference is not zero, check the following to locate errors.

You might have placed checkmarks next to entries that didn’t actually appear on the bank statement, or you didn’t check some that should be.

Verify that all dollar amounts for checks and deposits match exactly. Review all the bank charges, electronic withdrawals and debits on bank statement to make sure you entered them all.

If you do find an error made by the bank, (probably not going to happen) and you can verify this, give them a call.

Please always try to balance the account exactly. If you have to take a break, do so and come back to it later but I would never write off anything more than a couple cents.

Make a point of reconciling your accounts on a monthly basis, as soon as you get the statement from the bank. If you put it off month after month it’ll take longer to reconcile and if there are any big discrepancies it’s best to know right away. If you have any questions on how to prepare a bank reconcilation please ask in the comments below.

Thanks for reading and have a great day!