Why Your QuickBooks Reconciliation Will Not Balance

Everything is ticked, and the difference still is not zero. Before you reach for an adjusting entry to force it closed, work through this. Reconciliation differences almost always come from one of seven causes, and the size of the difference usually tells you which one you are looking at.

First, use the arithmetic

The difference itself is evidence. Before hunting line by line, test it:

• Divisible by 9? Almost certainly a transposition — 54 entered as 45, or 1,260 as 1,620. Look for two digits swapped.
• Exactly equal to a transaction on the statement? That transaction is either missing from QuickBooks or entered twice.
• Exactly double a transaction? A sign error. Something entered as a deposit that should be a payment, or vice versa.
• A round number? Often a manual entry with a typo, or a missing zero.
• Very small, under a dollar? Usually a rounding or currency conversion difference, or a bank fee nobody recorded.

The seven causes, in order of likelihood

1. A transaction on the statement was never entered

Bank fees, interest, standing orders and direct debits are the usual suspects, because no invoice or bill prompts you to record them. Scan the statement for anything that did not originate from your own activity.

2. A duplicate

Usually created when someone enters a transaction manually and the bank feed then adds it again rather than matching. Sort the register by amount and look for pairs.

3. A wrong amount

Transposition or a mistyped figure. The divisible-by-nine test finds most of these.

4. A transaction dated outside the period

A payment dated the 31st that the bank cleared on the 1st will not appear in the right reconciliation. Check the few days either side of your period end.

5. A previously reconciled transaction was edited or deleted

This is the one that catches people out, because the current period looks correct and the damage is historic. Someone opened a transaction from three months ago and changed the amount, or deleted it entirely.

QuickBooks Online keeps an Audit Log under Settings. Filter by date and by "Deleted" or "Changed" events. It will show who altered what, and when.

6. The opening balance is wrong

If the very first reconciliation on an account was wrong, every subsequent one inherits the error. Check the beginning balance QuickBooks shows against the closing balance on the previous statement. If those disagree, the problem is not in this period at all.

7. The bank feed matched to the wrong transaction

Two payments of similar value to similar payees, matched the wrong way round. Net effect on the balance is zero, so the reconciliation may still close — but your expense categories are wrong. Worth checking even when the difference is zero.

Never force it closed

QuickBooks will offer to post an adjusting entry to make the difference disappear. Declining that offer is one of the most valuable habits in bookkeeping.

A forced adjustment does not fix anything. It parks the error in a suspense-like account and hides the cause. The transaction that was actually missing is still missing, so it will distort your profit and loss, your tax return, and your VAT or sales tax position — and you will meet it again at year end with no memory of what caused it.

The one legitimate exception is a genuinely trivial, explained difference — a few cents of rounding or an unrecorded bank fee you have identified. Even then, code it to the correct account rather than to an adjustment.

If you have already forced one

QuickBooks posts forced adjustments to a Reconciliation Discrepancies account. Run a report on it. Each entry is an unresolved error waiting to be found.

Work backwards from the oldest. Find the real cause, correct it at source, then reverse the adjustment. If the period is closed for tax, speak to whoever filed the return before changing anything historic.

A method that stops this recurring

• Reconcile monthly, not annually. One month of transactions is findable. Twelve months is a project.
• Reconcile every account, including credit cards, PayPal and loan accounts. Credit cards are skipped constantly and are where errors hide.
• Close the books after reconciling. Settings → Advanced → Close the books, with a password. This is the single most effective control against cause number five.
• Clear the For Review tab first, so nothing is waiting to be categorised when you start.
• Save the reconciliation report each month. When something goes wrong later, it tells you exactly when the account was last known to be correct.

If you are reconciling for the first time or catching up on a backlog, our step-by-step guide on how to reconcile a bank statement in QuickBooks Online covers the process itself, and our guide to Undeposited Funds covers the account most likely to be causing trouble underneath.

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