Why we do them
We can never be sure that a set of accounts is correct if we’ve not done the bank reconciliation.
Even though we upload bank statements and/or have a bank feed, there’s a chance that there could be incorrect or missing transactions within QBO.
Reasons for incorrect bank transactions:
- There have been transactions added to the bank such as by ‘Receive Payment’ which is then a duplicate of the transactions coming through the bank feed / bank statement upload.
- The bank feed pulled in incorrect information
- The bank feed wasn’t working for a while, and when fixed, didn’t pull in all missing transactions.
When we do them
- For every period when we’ve uploaded statements rather than received them from a bank feed (e.g. for PayPal uploads, we need to reconcile each month/quarter, depending on the package)
- At each year end
- At each VAT period end date
- When we suspect that there is something incorrect in the books.
How we do them
We need a bank statement showing the running balance. Note that sometimes the Excel downloads do not provide these, which is why we ask for a PDF statement as well, as these always tend to have the running balance showing.
Given that a bank reconciliation compares what’s in QBO bank vs what’s showing on the bank statement, the first step is to ensure that the banking tab doesn’t show any transactions in ‘For Review’ for the relevant period.
The bank reconciliation doesn’t need to involve a transaction by transaction check; in fact, in most cases, we can do multiple months just by comparing the final balance. Where this is possible, it takes a matter of a minute to reconcile for all those months.
However, where there are differences, there may be the need to look in smaller chunks (normally per month) to identify where the issues are – see the example below:
We want to reconcile a 12 month period:
Step 1: check the balance on bank statements at the end of the 12 month period vs that on QBO. If it is equal, we’ve finished. If it’s not, see Step 2:
Step 2: check half way through the period, e.g. after 6 months. If that’s equal, now check 9 months; if it’s not check 3
In this way, we can ensure that we’re not doing month by month where, for example, the only error is in month 10.
What do we want to show on QBO?
As shown below, the ‘Statement ending balance’ is equal to the ‘Register balance’