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Quickbooks Reconciliations: Not Just for Banking

Most Quickbooks users are familiar with doing monthly bank reconciliations and the importance of doing so. Some reconcile credit cards on a regular basis as well (good job!). That’s where most reconciliations end, but don’t have to.  The bank reconciliation feature in Quickbooks (both Desktop and On-line) can be used to reconcile any balance sheet account, such as :

  1. Car and equipment loans
  2. Employee advances
  3. Customer deposits
  4. Retention
  5. Accrued expenses
  6. Prepaid expenses
  7. Fixed assets
  8. Prepaid revenue

Beginners/Moderate Users: I’d start using this for things like car or equipment loans (that you get a statement for or have an amortization schedule for. This way you can enter the interest at the same time.   After you master that, then I’d go to more complex accounts.

Advanced users: This can be used for the more complex reconciliations, for instance a prepaid expense account.  There are lots of entries and some of them have been amortized out, some haven’t and some are just errors. Finding what makes up that balance can take a day of spreadsheet work , but doesn’t have to if you regularly use this feature.

The most difficult part of the process will probably be finding a starting balance and clearing out any old transactions in there. After that, this can become part of your monthly close process and save all that scrambling at tax time.

To get started:

  1. Find a good starting balance. Let’s say you have one for 12/31/15.
  2. Go to the reconciliation screen and select the proper account .
  3. Enter the starting balance and the date (as our example) 12/31/15 as the account “ending” balance.
  4. Click “hide transactions after statement end date”.
  5. Clear all of the transactions to that date, the variance should be zero.
  6. Reconcile the account periodically just like a bank or credit card statement.

Using this feature on a regular basis can help save all of that spreadsheet work, hours of searching for errors and cumbersome tracking.


Quicbooks for Mac

I get many phone calls about supporting QB for Mac users. Many have become disappointed with the service of consultants in the business arena because Macs are different and so is Quickbooks for Mac and not every consultant understands that.

First of all, an iMac just works differently than a PC.  I’ve been using iMacs for about 5 years and a wide range of Quickbooks usage on Macs. Some people just buy QB for Mac (which can be a very different product than QB for Windows). It’s getting closer in look and feel but it’s still a different product.  Some users I support have an iMac and access a Windows cloud server to run a QB Windows version. Some users run a Windows emulator and run the QB version right on their iMac in Windows (this is what I do).  Yet others use Quickbooks on Line. An iMac is actually quite flexible in terms of what product you can use. It’s also becoming very business friendly. In fact it’s integration ability and sheer amount of power I’ve found on an iMac is pretty impressive.

If you use QB for Mac or some hybrid above, we can support any version or access method you find works for your business. For more information, please go to the About page and contact us at https://qbmess.com/about/

Managing Customer Deposits or Retainers

I get frequent Quickbooks questions and I believe that many users have similar questions. I will start posting answers to these questions in my blog for everyone. This week I received the following question:

Hi Tirena,

Please tell me if you know how to manage this issue. Often times, I get a retainer for a job. We create an invoice and customer pays the invoice. So, QB considers it an invoice paid and the account balance is $0. But, the system should show it as a credit. So, the question is “how do we bill for a retainer and have it show up as a credit?”

Dear Client,

The best way to handle this issue in Quickbooks is one of the following:

First, simply do not issue an invoice. Enter the payment on the customer’s account and then let it show as a credit.

However, customers often need an official document to pay from so you can either;

Enter an estimate or sales order (depending on your version) and then the customer can pay off that document and you enter the payment on the customer’s account showing the credit.


Enter an invoice then void it or right-click on the invoice to mark it as “pending”.

Once you start billing the customer for work, you can enter “real” invoices, then just apply that payment to those invoices. This is the easiest way to handle it in Quickbooks for most users. This method also gives your customer a clear accounting if you printed a statement for them.

Technically, your accountant will tell you, a credit or customer deposit should show up as a liability and then you apply it later. Quickbooks just doesn’t have an easy way to do this. If the retainer will be used up prior to year-end, then using the method above should be just fine.

Otherwise if it carries over or for Financial Statements for outside users (like banks or loans) or tax purposes your accountant has to reclassify it. Again for practical use purposes, using the method above will help to make sure you don’t make a mistake.

The harder, more technically correct way is to issue an invoice and use an item called customer retainer”. That item should be linked to an “other current liability” in your chart of accounts called “customer retainers”. Because until you earn it, it’s not income and it’s definitely not an asset. As you invoice your client for real work or product you can reduce the invoice by the amount of the retainer by either issuing a credit memo or entering a negative line item on the invoice using that same item called “deposit”. Then continue until you use up the deposit.

The only problem with this is you have to somewhat manually track the deposit. It’s all sitting in QB as a lump sum in that “other current liability” called “Customer Retainers” so you have to make sure you review that account regularly.

Either way should get you where you want to be, one is just a little more straightforward than the other. For companies that do a lot of retainers or have construction retention, there are other methods that are more complex than can be covered in a blog post.

Do YOU have a Quickbooks question I can answer? I’ve used Quickbooks since 1995 so there is very little I haven’t seen or fixed.  Send me a question and I’ll post the answer.  Go to the about page and send me a message https://qbmess.com/about/.