The Reconciliation Discrepancies account is automatically created when you perform your first account reconciliation in QBO. If the account has not been created, this is a red flag for your accountant, as it means that you have not reconciled any of your accounts to date. This account cannot be deleted and is used to report when your bank statement transactions do not match your QuickBooks Online transactions. The balance in this account should be zero.

QBO Automatically Records Reconciliation Discrepancy Amounts

When you are reconciling an account and there is a difference between the bank statement and the transactions in QuickBooks Online that you cannot resolve, you can choose to Finish Now button. When you do so, QBO automatically records an adjustment amount to Reconciliation Discrepancies. This is meant to be a holding account, as you will want to research and determine the exact cause of the differences, then make the necessary changes to move the amount from the Reconciliation Discrepancies account to the appropriate account.

Bank Rec Errors 1

Reconciliation Discrepancy Amounts From Expense Entry Errors

It should not be your first choice to Finish Now and record a reconciliation adjustment to “Reconciliation Discrepancies”. Often, differences are the result of a manual data entry errors made when entering a vendor expense or bill and payment. If you enter a vendor bill or expense incorrectly, the actual payment that comes through the bank feed will not match. In QBO there is an automation feature that can be turned on under the Advanced Company Settings to Pre-fill forms with previously entered content. This is a great feature, but it does automatically pull-in the last amount and account used for a vendor. If you are not careful, you can add a vendor expense or bill for the wrong amount under the wrong account.

Reconciliation Discrepancy Amounts From Misapplied Payments

Note that when you receive a direct customer invoice payment QBO automatically pre-fills the payment amount as the invoice balance amount. If you go directly to a customer account and choose Payment, QBO automatically applies the amount of the payment to the oldest customer invoice. Entering the wrong payment amounts cause reconciliation discrepancies.

Vendor Bill Rec Error 2

Reconciliation Discrepancy Amounts From Wrong Check Amounts

Some small businesses hand-write checks to vendors and contractors, then enter the check payments in QBO manually. It is not uncommon to manually enter the incorrect check payment amount. Then when the check comes into the bank feed, it cannot be matched. Entering the incorrect check amounts in QBO can cause reconciliation discrepancies. To correct this, open the check and correct the amount, then match it in the bank feed.

Vendor Bill Rec Error 3

Reconciliation Discrepancy Amounts From Credit Card Entries

Many small businesses manually enter credit card expenses into QBO under their connected credit card accounts. When the actual credit card charges come through the connected bank feeds, they can be easily matched to the manually entered transactions. If you manually enter the incorrect amount it will not match the amount that comes through the bank feed.

Vendor Bill Rec Error 3

Reconciliation Discrepancy From Unmatched Manual Expenses

One of the most common errors that I find during a Good Bookkeeping Audit™ of a QBO account is the adding of expense transactions directly within the bank feed without matching them to a manually entered expenses. This error will duplicate the expense on your account register, which frequently causes reconciliation discrepancies. Note that manually entered expenses are immediately recorded on your account register with no status. Once the transaction has been matched and added, it is marked with a “C” for cleared, and a green square icon appears underneath the “C” that indicates the transaction has been matched and added via the bank feed. If you have added a duplicate unmatched expense transaction you will need to Undo the adding of the transaction under the Reviewed tab. Then you will need to go back to the For Review tab, find the manually entered transaction, match and add it correctly.

Vendor Bill Rec Error 4

Reconciliation Discrepancies From Unmatched Manual Deposits

Another common error that we find during a Good Bookkeeping Audit™ of a QBO account is the adding of customer deposits directly within the bank feed without “matching” them to customer invoice payments or split bank deposits. This error will duplicate deposits on your account register, which also causes Reconciliation Discrepancies. All customer invoice payments that you receive directly to the bank account are immediately recorded on the account register. If there are multiple customer invoice payments that make up a deposit total, those payments should be received to “Undeposited Funds” account first, then a split deposit will be recorded on the account register when the QBO “Bank Deposit” is made. Note that when split deposit transactions are matched and added correctly, they are marked with a “C” for cleared, and a green square icon appears underneath the “C” that indicates the transaction has been matched and added via the bank feed. If there are two deposits on the same date in the same amount on your account register a bank feed error has occurred. If you have added a duplicate “unmatched” deposit transaction you will need to Undo the adding of the transaction under the Reviewed tab. Then you will need to go back to the For Review tab to find the matching customer invoice payments that have been added to the account register via a QBO bank deposit of Undeposited Funds that matches the total deposit amount that went into the bank feed.

Bank Deposit Error 1
Bank Deposit Error 2

Reconciliation Discrepancies From Transfers Between Accounts

One of the most challenging errors discovered during a Good Bookkeeping Audit™ is the incorrect transferring of money between accounts in QBO. The reason for this is that you can create Reconciliation Discrepancies in multiple accounts as a result of incorrect transfers. It is critical to follow the Order of Operations when transferring money between accounts. It is a best practice to manually create a transfer in QBO to match to the money that you have transferred between two accounts. If you transfer money from your checking to your credit card account as a payment, you should create this transfer in QBO so that the money spent in your checking account, and the money received in your credit card account can be easily matched to this transfer entry, as it can take a few days to show up in the bank feed. Alternatively, you would need to double check what happened in each account, and follow the order of operations, transferring money from one account to the other in the order the transfers actually occurred directly within the bank feed, without a matched transaction. You should NEVER add money received to an account before you make the transfer to the account.

Bank Rec Transfer Error 1
Bank Rec Transfer Error 2

Reconciliation Discrepancies From Duplicate Bank Transactions

Another common error that occurs is importing in duplicate transactions into a bank feed. This occurs when you select the incorrect date range for the transactions that you download from your bank or credit card account website and import them into your QBO bank feed. If the transactions are already added to your account register, you may mistakenly add them again because they were imported into your bank feed as new transactions. For this reason, it is important to carefully check the date and amount of the last transaction that was added to your account register before importing in new transactions. If you find that a transaction was duplicated, you can Undo the add of the transaction, then exclude and delete the transaction that was imported into your QBO bank feed in error. The duplication of bank feed transactions is a common cause of Reconciliation Discrepancies.

Regina Pitts
Regina PittsChief Financial Officer
Member of the QuickBooks ProAdvisor Program

Your Personal Guide to Seamless Accounting: Advanced QuickBooks ProAdvisor at Your Service

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The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.