QuickBooks Blunders, Part 1: Tales of Reconciliation Nightmares
In the first installment of my ongoing series “QuickBooks Blunders,” I’ll share with you a few scary tales of reconciliation nightmares I have come across and how to spot the most common signs of trouble when working with clients or working on your own bank reconciliations in QuickBooks.
The Bank Account Has Never Been Reconciled
Beware of clients who tell you that their books are reconciled – hardly anyone knows what a bank reconciliation is these days.
John has been in business for three years. He is finally ready to hire a bookkeeper. He says he has entered all his transactions in QuickBooks and that they are reconciled. I looked at his QuickBooks and noticed that John’s bank account had never been reconciled. Yikes! We have a lot of work to do…
How to Tell Whether a Bank Account Has Been Reconciled
Figure 1. In QuickBooks desktop versions (Enterprise/Premier/Pro), go to Banking > Reconcile. If the account has been reconciled, you will see the last date that it was reconciled.
Figure 2. In QuickBooks Online, click the Gear Icon on the top right and select Reconcile. There, you will also see when the account was reconciled.
‘Someone’ Has Deleted Reconciled Transactions
Beware of the ghost that deletes or changes previously reconciled transactions. This ghost is so sneaky that as soon as you clean up the books, he makes his appearance and transactions are mysteriously altered. Your client swears that they don’t know how it happened!
How to Tell When a Previously Reconciled Transaction Has Been Deleted or Changed
Figure 3. You will always know when a previously reconciled transaction has been altered because the Beginning Bank Balance in the bank reconciliation will have changed from the last time that the account was reconciled.
Figure 4. In QuickBooks desktop versions, go to Reports > Banking > Reconciliation Discrepancy. The report will list all reconciled transactions that have been deleted, changed, or voided.
Figure 5. In QuickBooks Online, go to the reconciliation window and look for any amounts listed under the Changes column.
Figure 6. To correct these discrepancies, re-enter or correct the transactions that have been deleted or changed. Then, make an “off-cycle reconciliation.” Follow the instructions below obtained from the Intuit support website.
The Bank Reconciliation Has Been Forced
Beware of bank accounts that appear to be reconciled when they really aren’t.
Joe and Cindy noticed an account on their Profit & Loss statement called “Reconciliation Discrepancies.” The account detail listed several transactions recorded to this account throughout the year, including some very big adjustments. They asked me to investigate these discrepancies. I discovered that their previous accountant was unable to reconcile the bank account so he forced the bank reconciliation every month. After many hours of work, we reconciled the bank account correctly. What a nightmare indeed!
Figure 7. Yes, if you didn’t know it, QuickBooks does allow you to force a reconciliation to balance (after warning you). However, it is intended to allow you to write off small differences (like $5) and not large differences (like $50,000).
Figure 8. The easiest way to tell if a reconciliation has been forced is to look for an account called “Reconciliation Discrepancies” in the Profit & Loss report or on the chart of accounts.
Fixing reconciliation discrepancies can be time-consuming and tricky. I have found that the best way to deal with discrepancies is to start over. I recommend that you undo the reconciliations in QuickBooks if there are material reconciliation discrepancies.
This is a small sample of the nightmarish bank reconciliation situations I have come across. I hope that you haven’t had too many reconciliation nightmares. If you have, leave a comment below and let me know what happened.
About the author:
Veronica Wasek is an Advanced Certified QuickBooks ProAdvisor, a CPA, a public speaker, and a member of the national Intuit Trainer/Writer Network. Veronica is the founder of VM Wasek CPA LLC, a QuickBooks-centric firm specializing in customized QuickBooks set up, training, clean up, consulting, and bookkeeping. Veronica’s blog, http://5MinuteBookkeeping.com, provides tips, videos, and tutorials for small businesses to get their bookkeeping done in as little as five minutes a day using QuickBooks Online.