by Marie | Mar 12, 2017 | Banking Setup & Management, Bookkeeping 101, QuickBooks Online, Reconciliations, Troubleshooting
This is one of the most common questions I get asked by new QuickBooks Online users, and you may be surprised to know that more often than not, both bank and QuickBooks balances are never matched simultaneously. However, if you have updated your bank downloads, reviewed and added them all to the QuickBooks register for a specific period or timeframe, and your balances are not matching there may be cause for concern. Here are three main reasons why your actual bank balance does not equal the bank balance in QuickBooks Online.
- You or someone else may have manually added some transactions to QuickBooks and then added them again from the download screen. (This is one reason why it is important to establish and use only one method of inputting your transactions in QuickBooks which is either a) adding transactions via the QuickBooks banking download option, or b) manually adding individual transactions. Adding transactions via the download option is my personal preference and recommendation, as it saves time as well as minimize data entry errors. Subsequently, if you are reconciling your account and realize there are transactions missing that were not downloaded, you can manually enter those missing transactions that are on your bank or credit card statement but not in QuickBooks. It’s very rare for this to happen, but it does!)
- You have manually written check(s) directly in QuickBooks and those checks have not yet been presented to your bank to be cashed. (This will cause your QuickBooks balance to be less than your actual bank balance by the check or checks amount.)
- You have received and applied customer payment(s) to their Invoices in QuickBooks, and also deposited them to the bank account in QuickBooks; however, you have not yet deposited those payments to your actual bank account or you have but they are not yet recorded by your bank. (This will cause your QuickBooks balance to be more than than your actual bank balance by the total of the deposit(s). (When you receive customer payments, you want to apply them to their respective Invoices for the dates that you receive them; however, you may not always deposit them to your actual bank account on the date that you receive them. This is where the undeposited funds account comes in; use the undeposited funds account to house those customer payments until you actually deposit them to your real bank account. When you have made the deposits to your actual bank account, use the Bank Deposit option at the plus sign top right of screen (as shown in the screenshot below) to transfer those payments in the undeposited funds account to the bank account in QuickBooks.)
How to Ensure Your Actual Bank Account Balance and QuickBooks Bank Balance are in Synch
In addition to the above-mentioned, if you track your cash flow on a daily basis, you will always be able to see what is causing your QuickBooks bank balance and your actual bank balance to be out of synch. Also, it is imperative that you reconcile your bank and credit card accounts regularly – at least on a monthly basis. Reconciliation is one of the most important aspect of accounting, and as such, reconciling your bank and credit card accounts on a monthly basis is the foundation of keeping healthy data and maintaining accurate books. Here are some mistakes that reconciliation can help you uncover:
- Missing transactions
- Duplicate transactions
- Transactions entered in error
- Transactions entered to the wrong period or bank/credit card account
- Incorrect transaction amount entered in QuickBooks
- Incorrect or no opening bank balance entered in QuickBooks
- Transactions previously reconciled have been changed or deleted
So, there you have it! The three (3) main reasons why your QuickBooks bank balance and your actual bank balance are not matching, and what you can do about it. Feel free to leave your questions or comments below.
by Marie | Mar 26, 2016 | Banking Setup & Management, Bookkeeping 101, Deposits & Undeposited Funds, Invoicing & Receivables, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online, Reconciliations
In order to use the undeposited funds correctly, it is important to understand how it really works. What are undeposited funds? Think of the Undeposited Funds account as an envelope where you keep checks until you take them to the bank. If you deposit more than one check or payment in a group deposit, you can enter those transactions so that your Bank Register matches your Bank’s monthly statement.
How to Accurately Use the Undeposited Funds Feature in QuickBooks
To use the undeposited funds accurately:
- When you record each customer payment, choose Group with other undeposited funds instead of Deposit to a Bank account.
- When you have all the checks entered and you are ready to actually deposit them in your bank, use Bank Deposits which is found under the Plus Sign Icon at the top of QuickBooks Online. In the desktop versions, go to Banking in the menu bar, and select Make Deposits.
- In the Bank Deposits or Make Deposit screen, click the drop-down to select the bank account you would like to deposit the funds to. This would of course be the bank account that you actually put the money in.
- Select the appropriate Date, and class or location if you are using them.
- You will see a Payments section. These payments listed are the ones you recorded and marked to go to undeposited funds. You can now select which of these payments should be included in this deposit to reflect the lumpsum deposit that was actually made to the bank.
- Click Save.
In order for this process to be successful, you must remember to go to the Bank Deposits window (in QuickBooks Online) or the Make Deposit window (in the desktop versions – Pro, Premier), and deposit the monies to the bank register in QuickBooks. Otherwise, they will just sit there, and if someone else is doing the reconciliations at the end on the month, they may actually enter those payments again directly to the bank register without realizing or even knowing that they were already in the Undeposited Funds account.
As you can see, there are still deposits in your undeposited funds account because the proper procedure was not followed. If the accounts were already reconciled for the period in which the transactions in the undeposited funds account relates, then the entries were entered twice – incorrectly increasing the revenue and may require an amended tax return to be filed if the tax for that period was already done.
I have explained indepth how to correct this in my articles:
by Marie | Mar 26, 2016 | Banking Setup & Management, Bookkeeping 101, Deposits & Undeposited Funds, Invoicing & Receivables, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online, Reconciliations
The main purpose of the undeposited funds feature in QuickBooks, is to give users the option of receiving customer payments and applying them to their Invoices on the dates received, while having a place to house them until they are ready to be deposited to the actual bank account. This is called “grouping deposits” in QuickBooks to reflect the lumpsum deposit that was made on a particular date. The undeposited funds feature can be a huge time saver, especially when it comes to reconciling bank accounts. You should absolutely use the undeposited funds feature:
- If you do not deposit each payment received from customers individually. If each deposit is done separately at the bank such as payments received from PayPal, Square, Shopify etc., there is no need to use the undeposited funds feature. If you receive customer payments via check or cash and you combine them to make one deposit into your bank account, then you need to post the individual payments to undeposited funds first. You will later go to Make Deposits and select the customer payments that made up the total deposits that were actually deposited on a specific date. You will need to ensure you change the date for the deposit in the “Make Deposit” window to reflect the date the deposits actually went into the bank. So, you use the undeposited funds when more than one payment is included in a deposit. That way the deposit in QuickBooks matches the deposit on your bank statement which will make it easier when it’s time to reconcile the bank account.
If you do not use the undeposited funds, then the amount is recorded directly in the check register. So, if you actually deposited several checks at once, you can imagine what a nightmare it becomes when you try to reconcile the checkbook. It creates lots of extra work – needlessly. If you use undeposited funds, then you “make deposits” that match the deposits you sent to the bank, which makes life much easier!
- When checks are received and not immediately deposited in the bank. This way, you will know the day the checks arrived and the day they were deposited. Using the undeposited funds feature in this case, will allow you to record the customer payments for the date in which they were received, and thus show accurate customer receivables while at the same time being able to deposit them on the date they were actually deposited. Without using the undeposited funds, it may be difficult to figure out what payments in QuickBooks make up what deposits on the bank statement when it’s time to reconcile the bank account.
When all is said and done, it is better to use the undeposited funds feature for all deposits, than to not use it for any deposits at all – especially deposits of more than one customer payments. You will have a more seamless, less time-consuming reconciliation process which is super important.
How to clear undeposited funds that were entered in error
If “in error” you mean that the transactions were to be sent directly to the bank account register instead of the undeposited funds account, then you can correct this either by: a) locating and editing the individual payments in question and changing the “Deposit to” field to the bank account. Or, b) you can deposit each payment in the “Make Deposit” window to the bank account by checking each one and changing the date to reflect the date it was actually deposited.
If “in error” you mean that the deposits were doubly entered; once directly in the bank via the check register, and again in the undeposited funds account, the cleanest, but also most time-consuming way to clear these items from the undeposited funds account or “Make Deposit” window is to open the corresponding deposits that were made without selecting from undeposited funds, click on the green Payments button, add the payment from undeposited funds, and then delete the incorrect payment that was entered. As long as the total deposit is unchanged, it will not unreconcile the previous reconciliations. However, if there are a lot of transactions in the undeposited funds account, it could take a really long time trying to resolve this. Why can’t I just delete them? You may ask. It is never okay to just delete anything from QuickBooks without knowing what other accounts and transactions may be affected. These customer payments in the undeposited funds account or make deposit window, may have been applied to Invoices. Deleting them will throw the accounts receivables out of balance, leaving the customers owing more in QuickBooks than they actually do in reality.
Bear in mind that most people who bypass undeposited funds use a revenue account to make the deposits, which means the revenue is possibly overstated – if those deposits are again applied to Invoices and are sitting in the undeposited funds account. So if you are trying to correct a period that you have already filed tax returns for, you will need to discuss this with your tax professional. You may need to file an amended tax return.
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