The Most Important Quickbooks Process to Complete Before January 2018

November 14, 2017

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Reconciling your bank and credit card accounts is the most important accounting process you should complete in Quickbooks. QB has a built-in “Reconcile” process that you can access in the “Banking” section on the home page.


The Reconcile process in Quickbooks is important for several reasons:
  • It makes clear which transactions you may not have entered in QB, which transactions should not have been entered and which amounts were entered incorrectly.
  • It is an opportunity to detect any fraud in your bank or credit card accounts.
  • It is an internal control procedure to be sure all sales proceeds have reached your bank account.
  • It gives you confidence that both government and management reports have accurate data (if transactions were coded correctly).

Perhaps the most compelling reason to be sure all of your reconciliations are completed are some fast- approaching January 2018 reporting deadlines. You want to avoid extra time, money and headaches by getting these reports right the first time. If not, they can come back to haunt you several months or even years later. It takes a while for the IRS and Social Security Administration to match up the reported amounts filed in various reports. But eventually, they will complete that process and then contact you if something does not match.

Common Filing Mistakes in Quickbooks

For instance, as a business that employs contractors or outside service providers, you may be required to file Form 1099 Misc for all non-employee compensation, and for rents paid. If the amounts are filed incorrectly or you don’t file on someone you should, you can incur penalties.

A second instance is if you have employees and you have payroll reports to file such as the Texas Unemployment Report and the Federal Forms 940, 941 and the employees’ W-2s, you don’t want to have left off or incorrectly included an erroneous payroll check. Not only do these errors affect your own records, but your employee may find out a year later that they filed an incorrect tax return based on the information they received.

These mistakes are more common than you might think — I see them all the time. The good news is that there’s an easy fix: reconcile your bank accounts regularly at the end of every statement period.

How to Reconcile Your Accounts in Quickbooks

First, I’ll share the technical process to reconcile your accounts in QB. This takes place when you’ve reached the goal of a zero balance in the “Difference” field on the reconciliation page. Second, I’ll share an equal — if not more important part of the process — that involves analyzing, researching and resolving all outstanding items. This second part is what assists you in filing your reports correctly the first time. When I first look over a new client’s books, this second part of the reconciliation process has frequently been left uncompleted.

To start the reconciliation process, click on the Reconcile icon and it will take you to this window: 

 

The technical process is pretty straightforward. Select the bank or credit card account you are ready to reconcile. Then, enter the ending date and balance from the statement. You can choose to enter any service charges or interest earned in the next two lines. Be sure to change the date fields and enter the account and class fields if needed. Now click Continue.

Next, check off all items that have cleared the account from your statement and from the listed outstanding amounts on the reconciliation screen. If you’re lucky, you will see the Difference field in the bottom right hand corner equal zero on your first time through.

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You may be tempted to celebrate and click on “Reconcile Now.” Not so fast! You need to complete the analytical part of the process. This is very important.

Once you have checked off cleared disbursements on the QB screen, you need to research and understand if the outstanding items are legitimate. If not, you need to correct them.

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In the screen above, I would look into why the 8/15 debit to Sally Smith and Associates, CPA has not cleared. For instance, is the debit really a check that is missing its check # and even then, why has it not been cashed? Or maybe I entered the transaction in QB, but never executed the debit. If so, I need to delete it. Debits should never be outstanding. What about the stop pay fee of $25 on 9/30 to my bank? It should have cleared. And in researching I find I entered it twice, so I need to delete this second entry. What about Payroll Check # 5001 to Elizabeth? I find out it should have been voided because I made an error on this one. I never gave it to her and created a new second check that she has already cashed.

Two of these transactions may have caused erroneous filings of payroll reports and Form 1099 if they had not been caught and corrected.

A word of caution, if you do have outstanding payroll checks that were given to employees and they truly have not cashed them, you cannot delete or void them ever. They are a part of your payroll records. You may replace them if the employee has lost their check and you may need to eventually escheat them to the state if they are never cashed. Check with your accountant about how to handle both situations correctly.

With your outstanding deposits, your main focus is why a deposit has not cleared. If it is simply on the cusp of the period end, then maybe it was not yet sent to the bank. If it is outstanding past the period it should have cleared, you need to investigate why the money has not made it to the bank or if there was an error in entering the deposit. Below, I would look into the deposit dated 11/1 for $4,000 since I would expect it to have cleared by the 11/30 reconciliation date.

In summary, now’s the time to start reconciling and analyzing all of your accounts. January 31st will be here before you know it and you want your Form 1099s & W-2s to be correct.

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Margie Monroe

Margie Monroe, CPA, LLC

Margie has been a CPA since 1980 and has always enjoyed assisting people. Whether it was her early years in both public and private accounting or her twenty plus years working with nonprofit organizations. For the last ten years, she has assisted businesses and individuals with their accounting needs using QuickBooks Pro, Premier, Enterprise, POS and Online through Margie Monroe, CPA, LLC. She can be reached at margie@margiemonroecpa.com.
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