The Importance of Reconciliation

This may seem silly to many of you out there, but there are some people new to this that might find some of the information useful...

To begin a reconciliation on QB Online go to the gear icon in the top right of the page and click on reconcile.  Select the account you wish you reconcile, and enter the date and ending balance on the account.  Select each of the transactions that appear on your statement.  If anything is missing it should be entered at this time. The purpose of the reconciliation is to verify that all transactions are recorded in QB that the company had during the month.

If there are things that have been entered that have not cleared there are a couple of things that should be done.  First if a check was mailed, but has not cleared yet, then do nothing, it will most likely show up in next month's statement.    If the check was lost, it should be cancelled with the bank.   If it was cancelled it should be voided in the ledger (this will make it so the check still appears, but shows a $0 amount, therefore not effecting the ledger).  You could also delete the check, but it will not show in the ledger if this is done.  Also, this will show up in the audit trail.

If there is a deposit showing in QB that is not appearing in the ledger, you have to find out why.  If it is a duplicate entry, then it can be deleted.  However, you might have bigger problems if it was a deposit.  Did it go into the wrong account?  Did it never make it to the bank?  You will have to do some detective work to find out what happened and take the necessary steps to rectify it.

Each and every account should be reconciled on a monthly basis.  If there are very few transactions you could do it quarterly, but the more months are done at once, the harder it might become to find the issues.   Each bank account, and each credit card should be reconciled, to make sure that the proper balances appear on the Balance Sheet.

It is quite easy for a discrepancy to appear.  The first thing that you should do is confirm the deposits and the withdrawals.  This will help narrow down which transaction you are looking for.   If both numbers are off then it might be easiest to start from the beginning.  Go slowly.  If yo begin to get frustrated you can leave it and come back when you have a clear mind, as frustration can become a big obstacle.   There is a button for this on the bottom of the page.   When you return the everything will be exactly as you left it.

A good trick to use is to make a copy of your statement for you to write on (write on the original if you want, you can always get another copy off line.)  Use different ticks, or a highlighter to mark off that you have checked it off in your reconciliation. I don't recommend crossing it out completely, as you might have to go back and do it again, and it is easier if you can read what the line says.  Once you get in to the swing of things, you will figure out what works best for you.  Stick with that.

Good luck.   If you have any questions please feel free to contact me.  I would be happy to walk you through it or help you find where the discrepancy lies.