QuickBooks reconciliation discrepancies are some of the most common problems that QuickBooks users face. Reconciling your books is often complicated and can be prone to error.
When you reconcile your books, you essentially match your bank statements with the transactions you have recorded in QuickBooks. This process can be tricky, as you need to match up many different transactions.
In this article, we will look at some of the most common QuickBooks Reconciliation problems and how to fix them. We will also provide a better solution that will save you time and hassle in the future.
What Are QuickBooks Reconciliation Discrepancies?
QuickBooks reconciliation discrepancies occur when the transactions in your QuickBooks account don't match up with the transactions on your bank statement.
This discrepancy can happen for several reasons, but usually, something has been entered incorrectly or is missing from QuickBooks.
What Causes QuickBooks Reconciliation Discrepancies?
Here are the most common causes of QuickBooks reconciliation discrepancies:
Timing Differences
A timing difference happens when a user records a transaction in the wrong period.
For example, suppose you record a January rent payment in February. In that case, it will show up as an outstanding reconciling item when you try to reconcile your bank statement in February.
Timing differences can also happen when you make a deposit in one period and don't record the individual checks or invoices that make up that deposit until later.
Incorrectly Recorded Transactions
Incorrectly recorded transactions are probably the most common cause of reconciliation discrepancies. It happens when you incorrectly register the amount, date, or account associated with a transaction.
For example, say you have a credit card with a balance of $500. You make a payment of $100 and record it in QuickBooks as $1000. When you reconcile your credit card statement, that payment will appear as an outstanding reconciling item.
Inexact Matches
Inexact matches can happen when two transactions have different amounts but are otherwise the same. For example, if you have a $100 outstanding reconciling item and enter a $101 payment, it will still appear as an outstanding item.
Inexact matches can also happen when recording a check that includes multiple items. For example, if you write a check for $100 to pay rent and $50 for office supplies, but you only enter the check's total amount ($100) in QuickBooks, it will appear as an outstanding reconciling item.
Missing Transactions
Missing transactions are pretty self-explanatory - they're transactions that you didn't record in QuickBooks.
Fraud
QuickBooks reconciliation discrepancies can also happen due to fraud.
Even though QuickBooks is one of the safest and most secure accounting software programs available, no software is entirely immune to fraud. There are several ways that fraud can happen in QuickBooks, including:
Creating Fake Vendors And Paying Them
Fraudsters can create vendor accounts in QuickBooks and write checks to them. They can then endorse the checks and deposit them into their bank account.
Creating Fake Customer Accounts And Invoicing Them
They can create customer accounts in QuickBooks and send invoices to them. They can then apply payments to those invoices and deposit the money into their bank account.
Manipulating Transactions
Fraudsters can change the date, amount, or account associated with a transaction. For example, they could change a check from $100 to $1000.
Siphoning Funds Into Secret Accounts
A fraudster could create a secret bank account in QuickBooks and transfer money into it. They could then use that money for personal expenses or pay other bills.
Note: Fraudsters are not always found outside the organization. Mostly, the employees commit fraud. Your most trusted employee can also be a fraudster. Therefore, it is essential to have proper internal controls to prevent and detect fraud.
How To Fix QuickBooks Reconciliation Discrepancies
If you're experiencing discrepancies while reconciling your QuickBooks data, there are a few steps you can take to fix the issue.
Step One: Run A Reconciliation Discrepancy Report
The first step in troubleshooting your reconciliation discrepancies is to run a discrepancy report. It allows you to get the data to pinpoint where the differences are coming from.
To run the report:
- Go to the Reports menu
- Click Banking option
- Select Reconciliation Discrepancy
- Choose the account you want to reconcile
- Click Okay
- Look at the information to detect the discrepancy
- Fix it once you spot it.
Step Two: Check Your Data Entry
Once you have run the report, it's time to check your data entry. There are a few things you want to look for:
- Are there any duplicate transactions?
- Are there any unposted transactions?
- Have you entered all of the transactions?
If you find any duplicate transactions, you will want to delete them. If you find any unposted transactions, you will want to post them. Once you have checked your data entry, you should rerun the report to see if you've fixed the discrepancies.
Step Three: Run Missing Checks Report
Missing checks are one of the most common reconciliation discrepancies. They can be caused by several things, including human error, bank processing delays, or simply forgetting to enter a check into QuickBooks.
To run missing checks report:
- Go to the Reports menu
- Click Banking option
- Choose Missing Checks
- Check the information to detect any discrepancy
This report will show you all of the checks that have been written but not entered into QuickBooks. You can then go through and enter them manually.
Step Four: Run Transaction Detail Report
A transaction detail report is a great way to get a comprehensive overview of all the transactions that have been processed in QuickBooks. It is mainly used to reconcile bank accounts, but it can also reconcile credit cards and loans.
To run a transaction detail report:
- Go to the Reports menu
- Click Custom Transaction Detail Report
- Make sure the correct date range is selected
- Click the Accounts field
- Choose the account you want to reconcile
- Set the date
- Choose the present date in the date field
- Check the report
If you see any discrepancies, you can investigate further by looking at the individual transactions. You can then make any necessary adjustments.
Step Five: Reconcile Each Account Regularly
The best way to avoid reconciliation discrepancies is to reconcile your accounts regularly.
To reconcile an account:
- Go to the Banking menu
- Choose Reconcile
- Select the account you want to reconcile
- Enter the ending balance from your bank statement
- Check the reconciled transactions against your bank statement
If everything matches up, then you're done! If there are any discrepancies, you can investigate and make the necessary adjustments.
Note: It's important to reconcile your accounts regularly to avoid discrepancies. By running missing checks and transaction detail reports, you can catch any discrepancies and make the necessary adjustments. Doing this also helps avoid potential problems down the line.
A Better Solution: Use Reconciliation Software
If you run an online store, you have to deal with many financial transactions.
Like most people, you probably use QuickBooks or Xero to manage your finances. But even the best accounting software can have its problems, and one of the most common is reconciliation discrepancies.
One of the best ways to fix QuickBooks reconciliation discrepancies is to use reconciliation software. This type of software can help you reconcile your accounts quickly and easily. It can also help you avoid mistakes that can lead to discrepancies in the future.
Reconcile.ly is one of the best reconciliation software platforms out there. It reconciles your Shopify orders with accounting software in real-time, making it easy to keep track of your finances and avoid discrepancies.
Consider using reconciliation software like Reconcile.ly if you're looking for an easier way to reconcile your accounts. It can make the process quick and easy and help you avoid mistakes that could lead to discrepancies in the future.
Why Should I Fix QuickBooks Reconciliation Discrepancies?
There are a few reasons why you should fix QuickBooks reconciliation discrepancies as soon as possible. They include:
Help Avoid Future Mistakes
If you can fix the discrepancies in your QuickBooks account, you can avoid making the same mistakes in the future. By avoiding future mistakes, you will save time and money.
Improve Overall Accuracy
Fixing reconciliation discrepancies will improve the overall accuracy of your QuickBooks records. Accuracy is crucial if you ever need to provide financial statements or reports to investors, lenders, or others.
Maintain Good Standing With The Tax Authorities
Shopify sales tax can be complicated and frustrating.
If you don't fix QuickBooks reconciliation discrepancies, it could lead to an audit by the authorities. An audit can be time-consuming and expensive, so it's best to avoid it.
Final Thoughts
QuickBooks reconciliation discrepancies can be frustrating, but they don't have to be permanent. By following the advice provided in this article, you can fix the differences and avoid making the same mistakes in the future.
If you want to simplify your reconciliation and avoid future discrepancies, consider signing up for a 14-day free trial of Reconcile.ly. The real-time, automated process will reduce disparities, saving you headaches, time, and money!
