Although the ability to import your banking and credit card activity into QuickBooks is not new, I find that many people misunderstand its purpose. Online Banking within QuickBooks does not replace the need to reconcile your bank and credit card statements to your QuickBooks activity. In the following sections I will discuss who benefits from online banking, how to import your transactions properly, and why the online banking feature is not the same as the reconciliation feature.
Is Your Company Proactive or Reactive?
In other words, do you print checks and enter deposits in QuickBooks, or do you pay your bills online at your bank’s website and use your credit card or debit card a lot? If your company’s bookkeeping is proactive – most of the checks are printed out of QuickBooks and customer deposits are entered manually – online banking won’t mean much to you. This is because importing your bank’s activity will only confirm what you have already entered manually.
If on the other hand, your company has a number of debit card, credit card and service charge transactions each month, then importing the activity from the bank or credit card website can help you make sure you don’t miss entering transactions. This can keep your bank balance in QuickBooks more up to date because you are not waiting for the bank statement to arrive in order to record all the debits and service charges that occurred the month prior.
What Online Banking does is import your latest bank or credit card activity into a holding tank in QuickBooks. Then QuickBooks tries to match the amounts it imported to items on your check register. If an item on your check register has not been cleared in the reconciliation screen, is within a reasonable date range, matches the check number, matches the amount, etc. then QuickBooks marks the item on your register with a lightning bolt in the “Cleared” column.
If QuickBooks cannot find a match, then it displays the item(s) left in the “holding tank” in a separate pane on your desktop, splitting the screen with the “holding tank” items on one side. This display can either be a split side by side or a split top and bottom (a preference you can change in Edit/Preferences/Checking/Company Tab). Now it is your job to classify the remaining items correctly. All the bank knows is the date it cleared and the amount. You must tell QuickBooks to whom it was paid/received and for what.
Aliases and Your Vendor List
Alias is the term QuickBooks uses to determine how to take the mumbo-jumbo payee name that is imported and match it with someone on your vendor list. So when you click on an item in the “holding tank” and click “Add to Register”, if QuickBooks does not recognize the vendor (for example, DDA #2223 STRS HOME D) then a pop-up window appears asking you to “Create an Alias”. You may choose from your vendor list and tell QuickBooks that this is really “Home Depot”. The next time this payee is imported from the bank, QuickBooks will recognize this as “Home Depot” and mark it accordingly.
Next you will see the item appear in your check register – or in side-by-side format you will see it by itself waiting to be recorded. You must check the Expense or Income account to which it will post. QuickBooks will suggest to you the last account you used for this vendor, but that may not be true this time. Also, in order to affect multiple accounts you must open the “splits” option (side-by-side) or click on Edit/Edit Transaction from the pull-down menu to get to the areas where you can assign Customer/Job or Class or use the Item tab instead of the Expense tab. Once you have verified that the information is correct you can record the transaction and move on to the next item in the “holding tank”.
A great example of how unhelpful QuickBooks can be is when an imported item says “American Express”. Your company takes American Express credit card payments from its customers and you also have a corporate AMEX card. An imported transaction from American Express could be 1) your payment on the corporate card, 2) a deposit settlement of AMEX customer payments, 3) monthly merchant service discounts or fees, or 4) a chargeback or refund to a customer. You will need to take the time to determine which scenario you are dealing with when interpreting the mumbo-jumbo “payee” line you see imported from the bank to the holding tank window.
If an item has already cleared (been reconciled) in QuickBooks (it has a check mark in the “Cleared” column), Online Banking will not match the transaction and you must manually highlight the cleared item in the register and click on “Match” to tell QuickBooks the transactions are the same. Also, if you have typed in an amount on your register that is incorrect, QuickBooks will not match an imported transaction to it: you must fix the error on the register first.
And finally you can delete items that you will never clear out of your “holding tank” only by switching the display to Side-by-Side. This display allows you to select items to delete. QuickBooks deletes them only from the holding tank, not the register.
Take heart! Your bank or credit card is smart enough to know what you have already downloaded into QuickBooks so you need not fear you will import them again.
Online Banking vs. Reconciliation
Finally, Online Banking is not the same as reconciling. Online Banking only knows what has cleared the bank, not what is in transit. Only you know what checks are in the mail, on hold, pending, etc. Secondly, it is only in reconciling the account to the bank statement that you find duplicate entries and other errors in your register, particularly old checks that have never cleared that need investigating.
Online Banking can be a very helpful tool especially if you have many electronic payments and online activity, but it must be used with open eyes. You are still in charge of classifying each entry to get the right information into QuickBooks.
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