QuickBooks Credit Card Reconciliation

The COVID-19 pandemic hastened the global transition away from cash, which was already underway. Using a credit card or an app on our phone was essentially the only way to make purchases while we were all on lockdown. That indicates that companies of all sizes are experiencing an increase in credit card transactions, both on the income and expense sides. Both our customers’ payments to us and our own payments to our suppliers and vendors are made simpler by plastic. But the simplicity of payment up front comes at the expense of complexity in the back end. It can be much more difficult to reconcile credit card transactions than it is to reconcile a bank account.

Understanding how to reconcile credit cards in QuickBooks is an important step toward good bookkeeping. Users can ensure that the activity on their credit card matches the activity on its statements in their QuickBooks account by reconciling the credit cards. Today, we’ll walk you through the steps to make the reconciliation process easier. Keep reading to find out what reconciliation is, why it’s important, and how to reconcile credit cards in QuickBooks.

What exactly is QuickBooks credit card reconciliation?

To survive and thrive in the long run, every successful business requires a clean book. As a result, good accounting is not only an important factor for a growing business, but it is also a legal requirement that any business should be aware of and strictly adhere to.  Credit card reconciliation is a common task that your finance teams must complete every month, even if they dislike it. Accountants use credit card reconciliation to ensure that all transactions on a credit card statement match those on the company’s books.

In this tutorial, we’ll walk you through the process of reconciling a credit card balance in QuickBooks Desktop, which is critical for keeping your financial transactions accurate and your business safe. We’ll show you how to link QuickBooks transactions to credit card statements and vice versa.

Simply put, accountants will compare the company’s credit card statements to the general ledger. Furthermore, if all payments in the ledger match those on the statement, the ledger may be considered accurate. There will be discrepancies if parts of the ledger do not match what is on the credit card statement, and the financial controller must determine what the causes are.

Complications that arise during the credit card reconciliation process:

If your company provides credit cards to employees to cover travel and other business-related expenses, they may use them for personal purchases on occasion. These should be paid by the employee, so keep an eye out for them, business owners. This should ideally be an uncommon occurrence.

Credit card statements almost never have an ending date that corresponds to the end of the month. That means you may need to perform an additional reconciliation for the month-end close to ensure you capture all purchases between the statement date and the month-end.

What is the importance of credit card reconciliation?

Credit card reconciliation is important because it demonstrates the company’s financial health. Reconciliation uses additional documentary proof, such as bank statements, receipts, and credit card statements, to confirm that each transaction is exactly as you claim it to be. This proves your book is accurate.

This becomes even more crucial in the event of an audit because then the tax office or a third-party auditor will require evidence of each payment that was made. Without that proof, your business could lose out on potential investments, fail an audit, and even run into legal issues—things that no business wants to happen.

You cannot expect banks and credit card processors to always produce accurate statements because they are human and subject to error. Sometimes things go wrong, but you shouldn’t worry about how to handle the reconciling process because QuickBooks, an accounting automation software, has made it incredibly simple.

QuickBooks is one of the most widely used platforms for accounting automation on the market, with more than 3.4 million small businesses using it. What’s better about it is that it was designed to be simple to use and assist business owners who aren’t financial experts. QuickBooks makes it possible for businesses to manage their finances more effectively by instantly updating all data from Magento to QuickBooks.

Which of the Two Reconciliation Styles Exists?

Credit card transactions, as previously mentioned, have an impact on both the expense side and the income side, so there are two different types of reconciliations.

Statements for credit cards the cost side is shown here. Your monthly credit card statements are used to reconcile any credit card payments your company makes for goods or services. Each credit card issued by your company to executives, managers, or other team members needs to be reconciled.

Services for credit card businesses This is the aspect of income. Your merchant account provider, which acts as a go-between for your bank account and the point-of-sale terminal or online gateway where the transaction takes place, processes credit card payments for you. Although reconciling these transactions is more difficult than reconciling the expense side, it is possible with a few adjustments.

Steps to Reconcile Your Credit Card:

Step 1: Choose “Reconcile”:

Click Banking from the top menu bar on your QuickBooks Desktop dashboard, then select the Reconcile dropdown. Another option is to go to your QuickBooks Desktop homepage and click on the Reconcile icon under the Banking menu.

Step 2: Enter the data from your credit card statement:

A pop-up screen will appear after clicking the Reconcile icon, asking for information from your account statement, such as the following:

1. Select the credit card account that you want to reconcile.
2. Statement End Date: Indicate the day on which the statement period ends.
3. Beginning Balance: Your last reconciliation’s ending balance serves as the beginning balance. QuickBooks Desktop will automatically produce this.
4. Ending Balance: On your credit card statement, enter the ending balance.
5. Finance Charge: Enter the finance charge, also known as interest, that was charged to your credit card along with the date and the expense account you want to charge it to.
6. If you’ve already entered all the expenses, leave this field empty because doing so will generate a credit card transaction for interest expense.
7. Click the Continue button at the bottom of the screen once all the necessary information has been entered.

Step 3: Balance Your Transactions:

• After you click Continue, the screen will show you the reconciliation summary.
• The best way to reconcile your account is to go through all your transactions and follow each one back and forth from your books to your credit card statement and vice versa.

Trace Your Statement from Credit Card to QuickBooks:

Check each and every transaction on the QuickBooks Reconcile screen, then compare it to the transactions on your credit card statement. Select the checkbox next to each transaction that corresponds to your statement. You’ll notice that the difference and cleared balance on the lower right side of the screen change as you check off a transaction. Making the difference zero is your aim.

Don’t delete a transaction in QuickBooks if it doesn’t appear on your credit card statement. Most likely, the transaction will appear on the statement for the following month. Any unmarked transaction from this month will automatically show up in the reconciliation from the following month. However, if the charge is older than a month, it needs to be looked into to see if the QuickBooks entry is inaccurate.

Trace Your Statement from Credit Card to QuickBooks:

• You must add a transaction to QuickBooks if it appears on your statement but isn’t in QuickBooks, but the transaction is accurate.
• Open the Enter Credit Card Charges screen from the Banking menu to start a new transaction. Based on your credit card statement, enter the accurate data.
• As soon as you click Save & Close, the transaction is added to the screen for reconciliation.

Step 4: Verify the $0 Difference:

When the discrepancy between your cleared balance and the statement’s ending balance is zero, you’ve successfully reconciled your credit card balance.

Additionally, you’ll see a Modify button on the screen, which enables you to alter the amounts you entered in Step 1 by clicking it. Click Reconcile Now if all the data is correct.

Step 5: Enter a Bill or Write a Check to Pay Now (Optional):

When you click Reconcile Now, a pop-up window will ask you whether you want to enter a bill for later payment or write a check for payment. Click Cancel to stop performing either of the two actions, and you’re done. Otherwise, select your alternative and press OK.

• Make a check payable right away: Make a check for the entire balance on your credit card or just the amount you want to pay.
• Add a bill for later payment: To pay the balance by the due date, enter a bill. To remind you to make the payment, this generates a bill that will show up on your screen of unpaid bills.

Merchant Services Reconciliation:

Since credit card processors process transactions differently than merchant services providers, reconciling your merchant services account can be a little more challenging than reconciling your credit card statement.

The amount deposited into your bank account may be reduced by the transaction fees that credit card processors charge for each transaction. This implies that the transaction amounts listed in your sales reports won’t correspond to bank deposits. Asking your credit card processor to only charge that fee once per month as opposed to every time a transaction is made is the best practice.

Another challenge in reconciling merchant account transactions is that while your sales transactions are detailed, your bank deposits are lump sums. Though there are frequently timing discrepancies, these lump sum amounts occasionally match the total credit card sales for a particular day. Depending on how your processor processes the sale, you might receive the money for a credit card purchase a few days after the customer makes the payment. Your accounting team might want to reconcile those transactions every day if you have a lot of purchases going through your credit card processor.

Many accountants set up clearing accounts for each accepted credit card type to get around the timing issue. Credit card sales are noted as a debit against that account. To make reconciling easier, remember to enter the transaction ID in the memo field.

When you’re prepared to reconcile your credit card transactions, download from your processor the detail that lists the transactions that made up the lump sum deposits. Make sure to cross-reference those with the sales transactions from your credit card records, paying particular attention to the transaction IDs. Make a journal entry to transfer one of those lump sum deposits’ component sums from the clearing account to your cash account as you clear the associated sums. When you perform your bank reconciliation, you will have a transaction that corresponds to the lump sum deposit that will show up on your bank statement.

Conclusion:

The simplest method for matching your transactions to the transactions on the statement in your account in QuickBooks is to enter the ending statement balance. We sincerely hope that this step-by-step guide on reconciling credit cards in QuickBooks is helpful to you. Please share your experiences with us by leaving a comment below, and don’t forget to check out our blog for more exceptional extensions.

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FAQ

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1. In QuickBooks, how do you reconcile credit cards?

To reconcile credit cards in QuickBooks, there will be five simple steps: Step 1: From the left menu, select Accounting and Reconcile. Step 2: Select the amount to reconcile from the drop-down box, and then enter your statement information. Step 3: Compare credit card transactions. Step 4: Verify the $0.00 difference.

2. In QuickBooks Desktop, how do I reconcile a merchant account?

A sign-in window will appear if QuickBooks Desktop detects that you are not logged in while you are reconciling a Merchant or Payments account. This guarantees that a legitimate company ID is successfully linked to your account. Select Reconcile from the Banking menu. Choose the desired bank or credit card account in the Account field.

3. Why does the reconciliation for my credit card payment not reflect it?

Because it was deposited into the cash account, the credit card payment isn’t reflected on the credit card reconciliation. You’ll need to review the audit trail of the payment transaction to resolve this problem and change it to the appropriate account so you can properly reconcile it. Select Reports from the top menu.