Doing your own bookkeeping in QuickBooks?
Throughout the month of June, I've been sharing information for those of you who do your own bookkeeping, especially those who use QuickBooks. I get a lot of questions about QuickBooks and how to best manage it on your own!
Before you get too discouraged, remember that none of us is born knowing this information. Managing your own bookkeeping has a steep learning curve, and it's a special skill you must learn, even if we're looking at basic reports.
Let’s take a look at two of the most common problems I see when people are managing their own QuickBooks.
What could cause your bank balance and QuickBooks balance to differ?
First, remember that on the QuickBooks banking screen, there are two different balances: the one pulled in from the bank and the one in QuickBooks. In a perfect world, these would always match or be close. But, often they are not.
The first, and possibly most common reason, is that the bank only updates your balance once a day. So, when you're looking at your bank balance on any given day, it's more than likely yesterday's ending balance and doesn't reflect today’s transactions, which won’t show up in the bank until tomorrow.
Another potential reason is that you've recorded transactions in QuickBooks that haven't cleared the bank. This is likely a check you've written that the recipient hasn't deposited yet. If you’ve just written a check today, then the bank essentially doesn’t even know about it yet. Therefore, your QuickBooks balance may differ from your bank balance.
A third, although less likely, reason is the beginning balance that is recorded when the bank account is first connected to QuickBooks. QuickBooks records this amount to get things started, but it often throws off the balance unless you know how to handle it.
Why won’t my bank and credit card accounts reconcile every month?
If you aren’t already, you should be reconciling your bank account with your bank statement (and your credit cards with your credit card statements) every month. This is a simple way to stay on top of your finances and ensure that what happens in real life is reflected in QuickBooks and vice versa. If you leave it to the end of the year to reconcile, you may miss some pretty big errors!
Here are other reasons why the balances might differ between QuickBooks and your bank statement:
The recipient may not have cashed their check yet,
You have a transaction that you entered in QuickBooks, likely at the end of the month, and it hasn’t had time to clear your bank, or
You entered something in QuickBooks, and it cleared the bank at a slightly different amount. An example of this is an electronic deposit where the transaction fees have already been taken out. You could have a $1,000 deposit recorded in QuickBooks, but it clears the bank for $970. ($1,000 minus a 3% fee)
Regardless of the reason, you should be aware of and address any discrepancies you can. If it’s an amount entered in QuickBooks at the end of one month but doesn’t show up on your bank statement until the following month, that is ok. If you have amounts from previous months that have never shown up on a bank statement, you need to look into those and find out what happened. Many times, they are erroneous and wrong and need to be deleted.
Ultimately, your goal is to have the same balance on your balance sheet that you do on your bank statement. When you run your balance sheet for the month, if the balance that it shows for your checking account is different than the amount on your bank statement, you need to find out why.
Need help?
As I mentioned in the beginning, there’s a steep learning curve when it comes to handling your own QuickBooks. My job is to give you peace at tax time and throughout the year by helping you manage your books so you can run the rest of your business. If you find yourself needing help, schedule an appointment with me, and we can discuss your concerns!