Reconciliation is an important part of your accounting cycle. It allows you to make sure your accounting records match your physical bank account numbers, which means you’re doing right. Sometimes and for some reason (of which we’ll talk a bit further), reconciliation doesn’t go as smoothly as you planned. At this point, you need to undo the whole thing and search for errors and discrepancies that stand on your way to success. If you’re using QuickBooks Online for your accounting (which is quite likely, as it’s the most popular accounting solution in the US), it allows for doing it pretty simply.
So, let’s see how to undo reconciliation in QuickBooks Online.
What is QuickBooks?
Let’s have a real quick word about QuickBooks.
QuickBooks is a popular accounting software developed by Intuit that is designed to help businesses manage their financial operations effectively. It provides tools for tasks such as tracking income and expenses, invoicing, payroll processing, tax preparation, and more. QuickBooks comes in various editions and products to cater to different business needs. Two of its prominent products are QuickBooks Online (QBO) and QuickBooks Desktop (QBD):
QuickBooks Online is a cloud-based accounting solution that allows users to access their financial data from anywhere with an internet connection. It is designed for businesses that want the flexibility of working on their finances from different devices and locations. QBO offers features such as online invoicing, expense tracking, bank reconciliation, reporting, and integration with various third-party ecommerce apps. Since it’s cloud-based, users don’t need to install software on their computers and can access their data through web browsers or mobile apps.
QuickBooks Desktop refers to the traditional software installed directly on a computer’s hard drive. It is available in different editions like Pro, Premier, and Enterprise, each offering varying levels of features and capabilities. QBD is typically chosen by businesses that prefer to have their financial data stored locally rather than in the cloud. It provides advanced features like more robust inventory tracking, industry-specific versions, and greater customization options. QuickBooks Desktop also allows for more extensive data handling compared to QuickBooks Online.
As a small or medium business owner, you are most likely to use the online version of QuickBooks. So, if it’s your case, and you’ve ever encountered failed reconciliation – grab your coffee, make yourself comfortable, and read on.
What is bank reconciliation?
As we’re going to learn about canceling failed bank reconciliation, let’s break down what reconciliation is, and why you need it.
In a nutshell, bank reconciliation is a process used by businesses and individuals to ensure that their financial records match the transactions recorded by their bank. It’s like double-checking your financial activities to make sure everything adds up correctly.
Here’s how it works:
- Start with your records
You have your own records of money coming in (deposits) and going out (withdrawals) in your account. This includes checks you’ve written, payments received, and other transactions you’ve made.
- Get the bank statement
The bank sends you a monthly statement that shows all the transactions they’ve processed for your account during that time. This includes deposits, withdrawals, fees, and other charges.
- Compare and match
You compare the transactions in your records with the ones on the bank statement. The goal is to make sure everything lines up. This means checking if the amounts, dates, and descriptions match.
- Find discrepancies
Sometimes, there might be differences between your records and the bank’s records. For example, you might have recorded a check that hasn’t cleared the bank yet, or the bank might have processed a transaction incorrectly.
- Make adjustments
If you find any differences, you need to figure out why they happened. It could be a mistake on your end, a bank error, or a transaction that hasn’t shown up yet. You adjust your records accordingly to match the bank’s statement.
Once you’ve gone through all the transactions and made the necessary adjustments, your records should now match the bank’s records. This is called reconciling your account.
Bank reconciliation is essential because it helps catch errors or discrepancies early on. It ensures that your financial records are accurate and up-to-date. By doing regular bank reconciliations, you can have confidence in your financial information, make informed decisions, and avoid any surprises or misunderstandings regarding your account balance.
In a professional context, bank reconciliation demonstrates your attention to detail and your commitment to maintaining accurate financial records. It’s a crucial step to keep your financial activities in check and maintain the integrity of your financial information.
How do you reconcile in QuickBooks Online?
In QuickBooks Online, think of the reconciliation process as a friendly way to ensure your financial records jive well with your bank’s records. Here’s a look at how QuickBooks Online takes care of the reconciliation process:
Once you’re ready to reconcile, you’ll find the “Reconcile” section nestled within the “Accounting” menu. Select the specific account you want to work with, like your bank or credit card account.
After sharing the ending balance from your bank statement – that’s the grand total after all transactions for a certain period – QuickBooks Online is ready to roll.
Imagine your recorded transactions and your bank’s transactions sitting side by side. It’s like comparing two sets of puzzle pieces to see where they fit. As you find matching transactions, it’s like checking off items on your to-do list. In the background, QuickBooks Online is diligently calculating the difference between your records and the bank’s.
If that difference isn’t zero, don your detective hat. QuickBooks Online helps you chase the clues to find out why those numbers might not be giving each other high-fives just yet. Did you spot a missing piece or a puzzle bit in the wrong place? Fix the situation by making adjustments right then and there.
The ultimate goal? Zeroing in on that zero-difference mark. It’s like finding the perfect harmony between your records and the bank’s version of events. Once you’re in sync, QuickBooks Online captures a reconciliation report. Think of it as a snapshot of your achievement – a summary of the matches and adjustments, all in one place.
Why would you fancy undoing reconciliation in QuickBooks?
Undoing reconciliation in QuickBooks is like hitting the “undo” button on a mistake, allowing you to fix errors or adjust your financial records. Here are some situations where undoing reconciliation might be necessary:
- Correcting mistakes
Mistakes happen, and sometimes you might accidentally mark a transaction as reconciled when it shouldn’t be. Undoing reconciliation lets you correct these errors without affecting your financial accuracy.
- Resolving discrepancies
If you discover a difference between your records and your bank statement after reconciliation, undoing it helps you investigate and fix the discrepancy.
- Adding missed transactions
If you forgot to include a transaction during reconciliation, undoing it allows you to add the missed transaction and balance your records accurately.
- Adjusting previous entries
If you need to modify transactions from a previous reconciliation period, undoing reconciliation gives you the flexibility to make necessary adjustments.
- Cleaning up entries
Maybe you’ve noticed duplicate transactions or entries that were reconciled incorrectly. Undoing reconciliation helps you clean up your records and maintain accuracy.
- Restoring balances
If changes you made during reconciliation affected your account balance incorrectly, undoing it helps restore your account to its previous balanced state.
- Preserving auditing trail
Maintaining a clear record of changes is essential for accountability. Undoing reconciliation allows you to fix errors while keeping a transparent audit trail.
As you can see, there can be plenty of reasons for undoing reconciliation. And QuickBooks allows you to do it, it’s a pretty straightforward process, if you know where to go and what to click. It’s worth mentioning that canceling reconciliation, you need to be careful, as it can impact your financial reporting.
Read our article How to import journal entries into Quickbooks Online and comparison Quickbooks vs Gusto.
Let’s undo your reconciliation in QuickBooks Online: a quick guide
Now, as promised, let’s look at how to undo reconciliation in QuickBooks Online.
But first, a disclaimer:
With time, the way software handles tasks might change. QuickBooks is no exception. At this point, the process described below may look different in the future. Just keep it in mind.
Unreconciling transactions is a step-by-step process. If you need to start anew, it’s wise to connect with your accountant. They have the ability to undo an entire reconciliation period using QuickBooks Online Accountant.
Here’s how to get your accountant on board:
- Click on the Gear icon situated in the top-right corner. From there, choose “Manage Users.”
- Navigate to the “Accounting firms” tab, then tap the “Invite” button.
- Enter the necessary details about your accountant.
- Don’t forget to save your changes.
- Once your accountant is in the loop, they can take care of undoing the entire reconciliation.
If you’re inclined to tackle it solo, these instructions will guide you in undoing reconciled transactions one by one:
- Begin by going to the “Accounting” menu. Then, pick “Chart of Accounts.”
- Locate the account you’re dealing with and opt for “View register.”
- To streamline the process, consider filtering the register to show only the transactions from the last 60 days.
- Take note of the check column – if a transaction is reconciled, you’ll spot an “R” there.
- Click the checkbox repeatedly until it’s blank. This action removes the reconciliation status from the transaction.
- Remember to save your changes and then close the register.
That’s it, you’done. Now, you can put your financial records in the right order.
As you can see, undoing reconciliation in QuickBooks is not rocket science if you know the process. However, it’s better not to have to do it. The key to successful reconciliation is super accurate bookkeeping, which is possible. Of course, if you go with manual bookkeeping, whatever careful you might be, errors will sneak sooner or later. A wiser approach is to automate the process by integrating your sales channels with QuickBooks to automatically synchronize business transactions.
Synder can help with that, as well as smooth reconciliation, accurate financial reporting, real-time business insights and many more. Book a seat at our webinar or sign up for a free trial to learn more about how it can help your particular business.