InvoiceSherpa Blog
Posted on November 16, 2020

The Ultimate Guide to Reconciliation How to Do It on Quickbooks Online

Reconciliation is an essential accounting process that ensures two different financial records are correctly matched up. This is especially important to ensure that your accounts are all in order. 

When your business is dealing with many transactions and numbers, it’s easy for small mistakes to start piling up and causing inconsistencies. 

 

If there are differences between records that are unexpected, it’s crucial to get to the bottom of the problem and either explain the discrepancy or regulate it. 

 

When working on the accounting of a business, it’s absolutely necessary to understand how to reconcile on Quickbooks Online, one of the most widely used online accounting tools in the world. In this article, we’ll go over the ins and outs of reconciliation, and a step-by-step guide on how to reconcile on Quickbooks. 

 

Let’s get started!

 

What is Reconciliation?

If you’re in the world of business management or accounting, chances are you’ve heard of reconciliation. 

 

However, it’s a typical accounting process that you may not fully understand or prioritize. This is usually done at the end of a fiscal period, and it double checks that the amount of money spent perfectly matches what your accounts are actually left with at the end of the period. 

 

Even a small error left unchecked could cause significant issues in your company’s financial statements, delays with invoicing or payments, and accruing accounting problems in the future. It also provides an important verification that there is no fraud or unsavoury activities going on.

 

There are many different types of accounts within a business. It’s important to perform reconciliation of the major accounts, such as:

 

  • Accounts receivable and accounts payable
  • Fixed assets
  • Cash
  • Investments
  • Prepaid expenses

 

Documentation Review

Reviewing documentation consists of checking the amounts shown on invoices or receipts, compared with the corresponding amounts shown leaving or entering the account in question. 

 

As a business, it’s crucial to hold onto every financial record for this reason. If there is an unrecognized charge, or a charge that doesn’t match up with your records, this could be a sign of an error or fraudulent activity.

 

How to Reconcile on Quickbooks?

Reconciling on Quickbooks Online is an easy and effective process, allowing you to efficiently reconcile your company’s financial records and check for any significant discrepancies. 

 

Let’s go over a step-by-step guide on how exactly you can do this.

 

Step 1: Get Your Financial Statements

In order to reconcile on Quickbooks, you’ll first need to have your financial statements on hand. Nowadays, most financial statements are sent out online. 

 

Be sure to have every statement in order before you begin the process of reconciliation.

 

Step 2: Reconcile on QuickBooks Online

Once you’re ready to get started, select the gear in the top right of the Quickbooks Online menu, and choose the Reconcile option in the menu. Now, it’s time to select the account that you wish to reconcile and enter the relevant information from your financial statement. This information will be:

 

  • The date range
  • Beginning balance
  • Ending balance

 

Then click, Start reconciling. Reconciling on Quickbooks is efficient because the software is able to do a lot of the work for you. However, it’s still crucial that you ensure you are entering all the right numbers and double checking every result presented.

 

Step 3: Read Over the Reconciliation Report

After Quickbooks does the reconciliation, you will be presented with a report chock full of information. Let’s go over what you need to pay attention to in this report. On top, you will see a summary including the beginning and ending balances, payments, and deposits.

 

Then, you will see a complete breakdown of all transactions. Each transaction will show the date of the transaction, the date it was cleared, the type of transaction, a reference number if applicable, the account, and the payee. On the right, you will see a green symbol that indicates whether the transaction was matched in the banking feed. You will also see sections for either payment or deposit, indicating the amount of the transaction. 

 

Step 4: Match Payments

Now, with your bank statement in hand, you can revise every transaction and ensure that each one matches. When a transaction matches, you can check it off on the furthest right column in Quickbooks. 

 

Once everything has been checked off, you should ideally see 0$ in the top right corner where it says Difference. Then, you can simply click Finish now

 

Afterwards, you have the option to view and save the reconciliation report in its totality. Reconciling in Quickbooks is that easy, and it helps ensure that you don’t miss a single transaction or let anything slip through the cracks.

 

Why is Reconciliation Important?

It’s easy for accounting errors to take place, so reconciliation is necessary to backtrack over a fiscal period and ensure that all errors are accounted for and reconciled (hence the name of the process!) 

 

If an error cannot be properly explained or reconciled, this could be a sign of deeper issues within your business, whether it is disorganized processes or fraudulent activity taking place. It’s easy to assume that these things won’t happen to you or your business, but the truth is that financial fraud is fairly common. 

 

In fact, financial fraud has been shown to take place almost every 15 seconds in the United Kingdom. In the United States, millions of people and businesses fall victim to it every year. 

 

As an accountant or a business owner, it’s your job to be proactive in order to avoid this risk or notice it as soon as possible to minimize potential damages.

 

Let’s recap everything we went over in this article:

 

  • Reconciliation is an important function of accounting that compares records and looks to explain and regulate any potential discrepancies.
  • Reconciling on Quickbooks Online is one of the easiest and most efficient ways to conduct reconciliation for your business.
  • Reconciliation is important because it checks for both minor errors or mistakes, as well as larger issues such as fraud or embezzlement. 

 

With InvoiceSherpa’s Quickbooks integration, it’s easier than ever to do reconciliation. Try our 14-day free trial to experience it for yourself!