Learn How to Reconcile in QuickBooks - A Beginner's Guide

QuickBooks is the most popular accounting software utilized by small to medium businesses. It is the premier way for these businesses to manage their income and expenses to keep track of the company's finances. As you can infer from the name, QuickBooks allows business owners to quickly manage their accounting books without having to hire a full-time accountant. The problem here is that it can get quite tricky or overwhelming to those who do not fully understand the software or use it. You can use the QuickBooks software for invoicing customers and paying your bills. It can also generate financial reports about your business and prepare your tax sheet for you to comply with. One of the primary uses for QuickBooks is to reconcile your bank and credit accounts. This guide will focus on teaching you how to reconcile in QuickBooks for complete beginners.

Reconciliation on QuickBooks is the easiest method for smaller businesses and individuals, so you have no excuse not to keep your accounts reconciled. There are currently two methods to do this, which utilize the QuickBooks Online and QuickBooks Desktop software. This guide will differentiate the two and provide a step-by-step tutorial to follow regardless of which QuickBooks version you use.

Suppose you are wondering whether you need QuickBooks Online or QuickBooks Desktop more for your reconciliation. In that case, both of these versions are sufficient enough for you to do a complete reconciliation of your accounts. The significant difference between the Online and the Desktop versions of QuickBooks is that QuickBooks Online requires no installation. In contrast, the Desktop version is a locally installed platform on your device. QuickBooks Pro is a more powerful version. However, if you need QuickBooks on multiple devices, then QuickBooks Online is the better option for you. Regardless, both versions are te best software available for small business owners and independents to reconcile their accounts.

As previously mentioned, you should ideally be reconciling your accounts monthly to make sure no significant discrepancies are happening with your finances. What QuickBooks does is that it matches the information provided by your bank or credit providers with the statements of your accounting. The beginning balance of the following month should be a complete match with the ending balance of the prior month. Proper accounts should be matching and without error at the end of the reconciliation process.

For users of QuickBooks Online, this guide will walk you through the proper procedures in reconciling bank statements. Make sure to follow this guide closely to avoid making any unnecessary errors that could affect your business and the health of your financial information.

QuickBooks Online conveniently has a page dedicated to reconciling activities. You simply need to navigate towards this page with any of the two possible ways.

1. The first way involves clicking on the "Accounting" tab located on the side panel on the left.


After this, left-click on the "Reconcile" option, which should then take you to the reconcile page.

2. The second way to go there is to click on the "gear icon," which should drop down the "gear menu." In the gear menu, click on the "Tools" option.

After selecting this, you should see an option that says "Reconcile," which will also take you to the page you need to be in.

Both options will lead you to the same place, so choose whichever feels more natural to you.

Now that you have made it to the Reconcile page choose the account you want to perform reconciliation on. Press the arrow on the drop-down menu to bring out the list of accounts.

After this, simply press the account you want to check. It can be your checking account, savings account, or even a credit account.

If reconciliation has been done before - or you are in the process of doing it - you can just press the "Reconcile" or "Resume Reconciling" buttons to start the process.

If you receive a notice that states your account is not ready for reconciliation because of an issue, you can press the blue link titled "We can help you fix it."

This error is usually caused by a deletion or modification of the previous reconciled account. To perform the reconciliation for the next month, the issue needs to be resolved.

There are common errors that can cause this issue to show up, and these are errors that you should avoid at all costs. These errors can mess up the reconciling process in QuickBooks Online and can guarantee that you will see the previously mentioned issue notice.

The most common error performed that can mess up the reconciliation process is changing the transactions listed in your accounts. This error occurs when you change the date of a transaction or outright delete or void a previously listed account. It can also happen if you change the source of a transaction that you had previously reconciled.

Again, all of these errors should be avoided at all costs to make the process easier. It can be stressful and time-consuming to search your records for minor changes such as these, so it is better to make sure they do not occur in the first place.

If it is too late and you have already committed the previously mentioned mistakes, do not worry, as you can still resolve them. It is recommended that you consult with your accountant about this issue, especially if you have deleted a transaction.

Deleting a transaction can generate significant discrepancies in the reconciled accounts. What these discrepancies indicate is fraud or business malpractice which you want to avoid at all costs. Because of this, it is vital that you resolve this issue and do not let it linger any longer.

Furthermore, deleting or voiding previously reconciled transactions can un-reconcile accounts that have already gone through the reconciliation process. It is always safest to take extra care when deleting something and only do so when certain about it.

Nevertheless, this guide will assist you in solving the issue so you can get back to reconciling your accounts. As previously stated, if a problem occurs, then you will see a blue link saying, "We can help you fix it." Press that link, and QuickBooks Online will show you where you went wrong or what went wrong with the reconciling process. Pressing this should take you to the "Reconciliation Discrepancy Report" page, where the option to fix the problem is located.

As you can infer from the name, the Reconciliation Discrepancy Report shows the discrepancies in your reconciled accounts. An example of what may show up is a forced reconciliation of an account.

If there is a forced reconciliation, there will be an "R" in the checkmark column of the register. It would be best if you never forced the reconciliation of an account as this will result in an error and not reconcile the transaction.

Luckily, in the Reconciliation Discrepancy Report, you can edit the discrepancies located there and solve the issues. Once all discrepancies are resolved, return to the Reconcile page.

On the Reconcile page, you should notice two blue links in the upper right corner of the page that say "Summary" and "History by account." The "Summary" link will show a list of previous reconciliations made and the date when they were completed. Pressing the "History by account" link will show a similar record as the Summary window, but this one now shows the changes and adjustments made to the previous reconciliations. It is also the primary way for QuickBook Online users to print out their reconciliation reports.

While on the "History by account" page, you can press the "view report" button to see the reconciliation report for the listed date. What will show up then is an extensive report about the reconciliations made and the reconciled accounts and transactions.

This report can get quite lengthy and complicated. A tip many QuickBooks Online users utilize is by checking the "Hide additional information" box on the reconciliation report. This box will then hide all the information, not including the data up to the ending date of the statement.

The tip is a visual one that allows you to see only what you need to see. It helps avoid confusion and mixing the transactions up with those from a later date.

Once you have cleared up any discrepancies and checked the reconciliation report, you can then move on to the next step. Remember that it is crucial that there are no more discrepancies before continuing.

Forcing a reconciliation will only lead to further problems needing even more time and resources to fix. It is recommended that an accountant checks these for you to ensure that you are in the right direction.

Do not be afraid to ask for help, as it is often better to ask for help than to be wrong and make costly errors. Only proceed to the next step if you are confident in your checking.

To start this next step, you are going to want to return to the Reconcile page. To do this, just click the "Reconcile" link at the corner of the reconciliation report. The previous step was a preparation for the following steps to come.

You can not continue to the next steps without completing it, so make sure you have done so already.

If everything in your accounts is in order, you are now ready to start the reconciliation process of a bank statement using QuickBooks Online. You can now press the "Reconcile" or "Resume reconciling" button that was previously mentioned, and no more error messages will pop up on your screen.

In this step, you will be keying in the bank statement information for the accounts you want to reconcile.

After pressing the "Reconcile" or "Resume reconciling" button, you will be taken to a window titled "Reconcile an account." There will be three key fields that you need to focus on.

These fields are the "Beginning balance," "Ending balance," and "Ending date." 

To start, enter the month's end date for the month you want to perform reconciliation on.

If you're going to reconcile the month of July, you should enter the field "July 31" of the year you are reconciling.

This date will be the date you record in the "Ending date" field of the account reconciliation screen.

The "Beginning balance" field will automatically be keyed in with the previous month's ending balance. Continuing with the example given, if you want to reconcile the month of July, then the "Beginning balance" field will contain the ending balance of June 30. This automatic input is just one of many ways that QuickBooks Online helps its users.

For the "Ending balance" field, it is required that you enter the ending balance of the month being reconciled. You can locate this in the bank statements given by your chosen financial institution. If you are reconciling the account of July, find the statement's ending balance as of July 31 and place that in the "Ending balance" field.

The final step here is to simply press the "Start reconciling" button located at the bottom of the window. As you can see, QuickBooks makes the process straightforward to follow.

Even those who are not the best in accounting would have little to no trouble following these instructions. If you do struggle, an assistant or an accountant can help you solve the issue in no time.

After pressing the "Start reconciling" button, you will be taken to a new window. This page will be named "Reconcile" plus the name of the account you are reconciling as chosen in the first step.

On this page, you will see a list of transactions such as your payments, deposits, withdrawals, and others that would show up on your bank statements.

At the top of this page, right under the title, you will see your "STATEMENT ENDING BALANCE" and your "CLEARED BALANCE" totals. Underneath that, you will see your "BEGINNING BALANCE," which is subtracted from your total payments plus deposits.

To the right of all this will be your "DIFFERENCE," which is an integral part of the reconciliation process.

The "DIFFERENCE" amount shows the amount difference between your "STATEMENT ENDING BALANCE" and your "CLEARED BALANCE" statements. As you check off the transactions listed below on this page, you will notice that the difference amount starts to lower.

You want this difference field to be zero by the end of this reconciliation process to succeed.

What you will need to do is inspect the transactions listed on this page and match them with the ones listed in your bank statements. If the transactions line up, you just have to check the circle located on the very right of the transaction.

Continue matching and checking off the transactions until it is all complete. If it is done successfully, then there will be no difference amount listed in the respective field. However, if there are transactions that appeared in your report and not in your statements, that indicates that there is a problem.

Furthermore, this will result in an amount listed in the difference field, which is also an indication of issues.

The previous window containing the list of transactions can often be overwhelming and difficult to sift through. The organization of the transactions is usually not applied, and they are organized only by the dates at which the transactions transpired.

This method of listing can be challenging to sift through, especially if many transactions occur the month you are reconciling. It makes it incredibly difficult to look for specific transactions or single out the ones you need to look at.

QuickBooks Online understands this, and they have implemented the necessary features to allow QuickBooks users to filter out the transactions they do not need to focus on.

When opening up the reconciliation statements window, its default setting shows all the transactions that are yet to be registered and reconciled in the system by the month's end date.

To filter the transactions in the window, you need to press the filter icon located in the top left corner of the screen. The filter button is the icon in the corner that looks like a funnel you would use at home. Pressing this icon will bring up the filter window for you to use.

The filter window is relatively straightforward, and you can just follow what is listed there to find what you need. You can filter the transactions between payments or deposits to make the list easier to look at visually.

Using the filter window, you can even search up individual transactions that you need to see. This search function can locate transactions based on their reference number, amount, and other items.

QuickBooks Online users mainly use this functionality to make it easier to match and check off transactions that they have difficulty locating.

Filtering your transactions can save you many headaches, especially if there are multiple transactions listed for reconciliation.

Working for zero is a weird statement to say and an even weirder goal to chase. However, in reconciling, your main priority is to achieve that zero difference amount.

You need to keep checking off transactions and keep lowering that difference field until there is nothing left. Remember, do not just keep clearing transactions for the sake of reaching a zero difference amount.

You are doing this to ensure that there are no discrepancies between your transactions and your bank statements. The reconciled accounts need to be wholly accurate and match that of your statements.

Once you have achieved that coveted zero difference field, you will receive a "Success" window with a large green checkmark to indicate that you have succeeded.

On this page, you can check the extensive report that was discussed earlier. Just press the "View report" button located at the bottom left corner of the window. Running the report can let you have one last check to see if everything is in order. Furthermore, you can print your results from this page and allow your accountant to view them.

 If you do not need to consider the report right away, you can just press the green "Done" button on the opposite corner. After that, congratulations are in order as you have completed the reconciliation process in QuickBooks Online.

As mentioned earlier, QuickBooks Online and QuickBooks Desktop are similar, but they are not the same. QuickBooks Desktop is considered to be the more powerful and professional version of the software. Furthermore, it is more expensive to acquire.

However, this does not mean that it is more challenging to reconcile accounts on QuickBooks Desktop. In fact, in following this guide, you will see that the process is quite comparable in terms of difficulty.

Before you begin reconciling on QuickBooks Desktop, it is recommended that you backup your QuickBooks company file. What this does is that it protects your file if you make a mistake or mess something up. Regardless of how confident you are, it does not hurt to be careful and safe with your files. 

To start reconciling on QuickBooks Desktop, you must first navigate to the "Begin Reconciliation" window. To do this, click on the "Banking menu," which will bring out some options. Select the "Reconcile" option, and it will take you to the required window.

Once in the Begin Reconciliation window, choose the account you wish to reconcile. The information relating to this account will then show up on the window for you to check. Ensure that all the data listed here is entirely accurate and what you are looking for before continuing.



The Begin Reconciliation window should have a field named "Account." This field is where you will select the account you want to reconcile. The "Statement Date" field will automatically fill itself 30 to 31 days after the previous statement date, but you can adjust this as necessary. Make sure everything is precise - the Statement Date field should show the end date of the account statement you will reconcile. 

The "Beginning Balance" field will also be automatically keyed in with your previous account statements as the basis. Even though this field is done automatically, you must still check whether it is accurate and correct. If it is correct, then the amount listed in the area should match that of the opening balance amount in the bank statement you will reconcile.

However, the "Ending Balance" field will remain empty as you will need to input that yourself. Fill this field with the corresponding ending balance located on your bank statements. Again, this should be accurate, and make sure it is from the month you are performing your reconciliation. Furthermore, make sure that you are doing this for the correct account one last time. It does not hurt to be extra careful as this will save you much headache.

The next step you should do is to check your bank statements for any added transactions. Look if your bank included any service charges. If you see an expense for the services provided by the bank, then you should input that into the "Service Charge" field.

Furthermore, if your accounts have earned any interest, then you should make sure to include that as well. It is important to note that you should only do this if you have not entered these amounts into your QuickBooks statements yet. You absolutely should not add them if they have already been entered, as this will lead to discrepancies.

However, discrepancies are sometimes unavoidable and just the result of human error. To alleviate any discrepancies that might interfere with your reconciliation, press on the "Locate Discrepancies" button found in the bottom left corner of this window. This button will provide you with a report tracking the discrepancies and other issues that may come up in your reconciliation. In this report, you can locate the problems and resolve them to continue with the process. 

As a last resort, you can press the "Undo Last Reconciliation" button located at the bottom to revert to the previous reconciliation completed. This button will allow you to restart and try again without committing as many mistakes.

Once everything is in order and there is no more inaccurate information, you can press the blue "Continue" button to proceed to the next step. 

Pressing continue on the "Begin Reconciliation" window will bring you to the "Reconcile" page of QuickBooks Desktop. In this section, you will be matching and clearing transactions to reconcile your accounts. The information listed on this window is grouped neatly in tables for you to sort quickly. Keep clearing the transactions until your difference reaches zero.



A helpful tip is to press the checkbox located at the top right corner of the window, which will hide the transactions you do not need to work on. Only the transactions listed in the period you specified will be shown so that you can focus on them.

QuickBooks Desktop separates the transactions into two separate sections. The left section is all your transactions involving money going out of your account, while the right section concerns money coming into the account. These sections will assist you in validating your transactions with that of your bank account statements. 

There is an option on this version of QuickBooks to check all the transactions listed on this page. You can utilize this to save time if you do reconciliation regularly. Remember, the difference at the end should be zero and nothing more or less. If there is no difference, your statements are accurate, and you may already complete your reconciliation.

The Desktop version also allows you to open and edit a transaction if you notice any errors in it. Users need to press the "Go To" button and enter the transaction they wish to alter. This button is primarily used for minor modifications, and you should not be changing anything for the sake of making the difference zero. Only do it if you are entirely sure about the changes being made.

Another neat function of the Desktop version is that you can link it to your bank feed and receive the statements directly in QuickBooks. This function will allow you to auto-match transactions that were downloaded from the bank feed and check them off immediately. 

No matter which of the approaches you take for reconciliation, the difference amount at the end of it should be zero. If you get a zero amount difference between your ending balance and cleared balances, you can be confident that the reconciliation was a success. You can print your report of reconciliation for your further usage if you would like. 

Both QuickBooks Online and QuickBooks Desktop are powerful tools you can use for all your accounting needs. For reconciliation, QuickBooks can make the process easy and fast as long as you know how to do it. As with any software, you can always contact customer support for any issues you may encounter that you can not solve on your own. Alternatively, you may just wish for some human support in conducting your QuickBooks tasks. Customer support is there to help you, so you should not be afraid to contact them if you have any needs or issues.