Legacy Field Notes: Why Your Cash Account Will Not Reconcile

This was the first blog post I ever wrote.

I was already irritated by files that “reconciled” but didn’t actually match the bank.

I didn’t have better language yet, so I wrote it the only way I could: step by step, transaction by transaction.

The wording is early. The problem is the same one I still see.

Original Context

Originally written: July 2017
Platform: Facebook

A Step-By-Step Guide

THE SCENARIO: Sally has been in business for 5 years, she hired a bookkeeper to do her day-to-day duties a little over a year ago. She was very excited to have time to concentrate on building her business. Unfortunately, Sally’s bookkeeper just up and quite without a buy your leave. So, Sally is sitting here trying to figure out how to reconcile her bank statement with her income account in QuickBooks. However, she is not able to reconcile her books because she is missing stuff and can’t figure out where to find a solution. So, she went to the web to try and figure it out by reading this blog.

THE PROBLEM: Why Is My Cash Account Not Reconciling With My Statement?

THE SOLUTION: There are many reasons why you are not able to tie out your bank statements, below are 5 of the most common reasons why and how-to go about solving the problem.

WHY THIS IS IMPORTANT? Although it may seem like a daunting task, reconciling your accounts is a critical accounting task that you should carry out every month. Doing so helps ensure the integrity of your financial reports, since most of your accounting transactions ultimately affect cash in some fashion.

1) The transaction date was posted in the future
Most reconciliation windows will ONLY show the transactions through the ending date of your bank statement. In order to see if the unreconciled item was posted in the future, change the date to include future transactions. I would go a year in the future just in case. If you do find the transaction, you should be able to change the date and reconcile the item by double clicking on the transaction and changing the date. This will work in QuickBooks. However, if you are using SAP or Sage, the process is a little different because you are not able to change anything in this software once it has been posted. So you will need to go in and void the transaction and re-create it.

2) The transaction amount was entered incorrectly
When going through each line item when reconciling, look to see which items have not been cleared and sort your report by uncleared transactions and go through each one to see if the date and descriptions match your statement but the amounts are wrong. QuickBooks will allow you to change the amount and save it. However, if you are using Sage or SAP, you will need to void the transaction and recreate it. You can create a debit/credit note to increase or decrease the amount depending on the discrepancy and posting it to the original transaction. Once this is completed, then you can go in and post the transaction.

3) The transaction was posted to the wrong account.
Most accounting software has a “find” button or a short cut to use to get there. For instance: QuickBooks online has a search button, QuickBooks Desktop has a “ctrl+f” button, and Xero has a magnifying glass icon you can search (Not Fixed Assets/Payroll).

• Enter the amount of the transaction from your statement that needs to be reconciled
• Locate the transaction in the list that is provided.
• Look to see what account the payment, journal entry or deposit was posted to and change to the correct account.
• If you work in a program that does not allow you to do this, such as Sage or SAP then:
• If you are working in the current period, you can void the payment and re-issue to the correct account OR
• If the account you need to change was from a closed period, you can create a journal entry to re-class from the wrong account to the correct account.

4) The Transaction Has Not Been Posted Yet:

♦ For Payables that were not paid via check through your accounting system:

If you run the aging payables report and the bill is still on the report, the payment was not processed through the system yet.

• Go to your pay bills window and process the payment with the same date and transaction number from your statement.

If you run the aging payables report and the bill is not on the report and you can not see it in your vendor profile then it has not been posted yet.

• Locate the source document (i.e. the bill/invoice)
• Go into your enter bills/enter invoices screen and go through the process of entering in the bill, paying the bill and posting the payment in your accounting system.

Important note: Make sure that the account code you enter into the bill is correct. This will eliminate any reclassifications that will need to be completed when you do your month-end close. Also when you pay your bills, make sure the bank account is the one you are paying the bills out of.

♦ For Receivables that were not recorded into the bank account or that the payment was not received yet:

If you run the aging receivables report and the invoice is still on the report, the deposit was not recorded through the system yet.

• Go to your “Receive Payments” window and create and apply the payment to the customer.
• Go to your “Record Deposits” window to deposit the funds into your bank account.

Important note: If you made multiple customer deposits in one deposit, your bank is going to record the FULL amount of the deposit.

5) You did not reconcile the account with the correct transactions on your previous reconciliation(s)

Many people just reconcile their accounts without making sure that what they are reconciling are matching with the bank statement. Just because the amount is the same, does not necessarily mean that it is the same.

Thank you for ready my post. If you have any questions, please feel free to leave a comment.