June 2024 Managing the Money with Megan Schmitke

managing the money the inventory genius newsletter May 31, 2024
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What is a Reconciliation?

by Megan Schmitke

Reconciliation - there’s a fancy accounting word for you. But, what exactly does that mean? Well, let’s take a look!

A reconciliation simply means that you are comparing two sets of financial records to make sure that they match. In most cases, you will be comparing your Quickbooks (or other bookkeeping software) information, to the statements provided by your bank, credit card company, or payment processor.

This is important because it helps ensure that the information you’re using as your bookkeeping records is accurate. After all, you will be using this information to file your taxes and help make important decisions, so you want to make sure it’s accurate!

Being able to reconcile, or match, the information you have in Quickbooks to your statements will help ensure that nothing has been missed, or duplicated, in error. Even if you have all your bank & credit card accounts connected in Quickbooks, reconciliations are still super important because those bank feeds are NOT perfect. They glitch, and sometimes transactions will be pulled in twice, or missed altogether.

So, how do you perform a reconciliation inside Quickbooks Online? They make it really slick!

In Quickbooks Online, go to Transactions > Reconcile. Pull out all your monthly statements for the current year for the account you want to reconcile. Start with the first statement of the year and find the Ending Balance and the Statement Date. You will enter these 2 pieces of information on your Quickbooks Reconciliaiton screen. Then click “Start reconciling”.

On the new screen, you will see a listing of ALL the transactions that are “unreconciled” through the statement date.

Quick note: If you’ve never done a reconciliation before, you may want to do a bulk reconciliation to clear out all the old transactions from prior years. If you need help with that, feel free to send me a DM on instagram @findingfreedomfinancial.

If a transaction was added from a connected bank/credit card feed, it should be automatically checked off. The goal of the reconciliation is to get the green “checkmark” icon, and for it to display a $0 difference. That means that the total deposits/withdrawls in your Quickbooks matches the totals reflected on your bank or credit card statement!

So, what about payment processor accounts?

If you utilize Stripe or PayPal, they do provide monthly statements that make it easy for you to reconcile those accounts each month. But, what about Shopify or Sezzle? Although there’s no straightforward report, you CAN use the transaction reports to see what is in-process at the end of each month to make up an “ending balance”.

I want to challenge each of you to start making sure that you are reconciling ALL of your bank accounts, credit cards, and payment processors each and every month to make sure that all your numbers are accurate and useful in helping you make decisions to grow your businesses!

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