How to Do Bank Reconciliation in QuickBooks Online
QuickBooks gives you two distinct ways to reconcile. Most people use one and ignore the other. That's a mistake. Here's how both work, when to use which, and what to do when the numbers don't agree.
Bank reconciliation in QuickBooks Online is the process of verifying that your QuickBooks records match your bank statement. QuickBooks provides two methods: automatic bank feed matching for day-to-day categorisation, and the classic Reconcile tool for formal month-end verification against a statement balance.
Bank reconciliation in QuickBooks Online is one of those tasks that sounds straightforward until you actually sit down to do it. The concept is simple: make sure the transactions in QuickBooks match the transactions on your bank statement. The execution gets complicated because QuickBooks has two separate mechanisms for doing this, they serve different purposes, and the software doesn't do a great job explaining when you should use which one.
This guide covers both methods in full, with the practical detail that QuickBooks' own documentation tends to gloss over. If you've ever stared at a reconciliation difference that refuses to reach zero, or wondered why matched bank feed transactions still show as unreconciled, this is for you.
Two reconciliation methods (and why you need both)
QuickBooks Online has two completely separate reconciliation workflows. They live in different parts of the interface, they do different things, and confusing them is the single most common source of reconciliation headaches.
Bank Feed Matching
Where: Banking tab (Transactions menu)
What it does: Imports transactions from your bank and matches them to existing records in QuickBooks
Purpose: Data entry - getting transactions into QuickBooks efficiently
Result: Transactions are categorized and recorded in your books
Classic Reconciliation
Where: Settings (gear icon) > Reconcile
What it does: Compares your QuickBooks register to a bank statement for a specific period
Purpose: Verification - confirming your books match the bank
Result: Transactions are marked as reconciled (locked down)
Here's the critical distinction: matching a transaction in the Banking tab does not reconcile it. Matching means you've told QuickBooks "yes, this bank transaction corresponds to this entry in my books." Reconciling means you've verified that your books and the bank statement agree for a specific statement period. One is about recording transactions. The other is about proving they're correct.
Most small businesses that rely solely on bank feed matching and never run a classic reconciliation are flying blind. Their books might be complete, but they've never actually verified that everything ties out. Most accounting firms that skip bank feed matching and enter everything manually are doing unnecessary work. You need both.
Method 1: Bank feed matching step by step
Bank feed matching is the day-to-day workflow. Once you've connected your bank account to QuickBooks, transactions flow in automatically (usually with a 24-hour delay). Your job is to review them and tell QuickBooks what they are.
Go to Banking (or Transactions > Banking)
Select the bank account you want to work on from the tabs at the top. You'll see a count of how many downloaded transactions are waiting for review.
Review the For Review tab
Each transaction from your bank feed sits here until you deal with it. QuickBooks attempts to auto-match each one against existing records (invoices, bills, manually entered transactions). Transactions with a suggested match show a green "Match" link. Unmatched ones show "Add" or "Transfer."
Handle matched transactions
Click on a transaction with a suggested match to expand it. Verify the match is correct - check the date, amount, and description. If the match is right, click Match. This links the bank feed transaction to the existing record in QuickBooks. If the suggested match is wrong, click the "X" next to it and either find the correct match or categorize it as a new transaction.
Categorize unmatched transactions
For transactions with no match, QuickBooks may suggest a category based on prior history. Review the suggestion. If it's correct, click Add to create a new expense or deposit in your books. If the category is wrong, change it before clicking Add. You can also split the transaction across multiple categories (more on that later).
Use batch actions for speed
Select the checkbox next to multiple transactions, then use the batch action menu to accept all selected matches or add all selected categorizations at once. This is where you save real time - but only if you've verified each one first. Batch-accepting without reviewing is how errors creep in.
Check the Categorized and Excluded tabs
Categorized shows transactions you've already processed. Excluded shows transactions you've chosen to ignore (personal transactions on a business account, for example). Review Excluded periodically to make sure nothing was excluded by mistake.
The Recognition Engine
QuickBooks learns from your categorization history. If you categorize three Starbucks transactions as "Meals and Entertainment," QuickBooks will suggest that category for future Starbucks transactions. This is useful but not infallible - it categorizes based on description patterns, not context. A purchase at a restaurant supply store might get auto-suggested as "Meals" because the vendor name contains "restaurant." Always verify before accepting.
Method 2: Classic reconciliation step by step
Classic reconciliation is the accountant's reconciliation - the formal process of verifying that your QuickBooks register matches your bank statement dollar for dollar (or pound for pound) for a specific period. This is the one that actually proves your books are correct.
Go to Settings > Reconcile
Select the account you want to reconcile from the dropdown. If you've reconciled this account before, QuickBooks shows your last reconciled date and the beginning balance.
Enter your statement information
Open your bank statement (the PDF or paper document from the bank) and enter the statement ending date and ending balance into QuickBooks. These must match exactly - including cents. QuickBooks uses these figures to calculate whether your reconciliation balances.
Check off matching transactions
QuickBooks shows all unreconciled transactions in the account, split into deposits/payments on one side and checks/expenses on the other. Go through your bank statement line by line and check off (tick) each transaction in QuickBooks that appears on the statement. The key number to watch is the Difference field at the top - this is the discrepancy between what QuickBooks expects and what you've checked off so far.
Get the difference to $0.00
When every statement transaction has been checked off and the Difference field reads $0.00, you're balanced. Click Finish Now. QuickBooks marks all checked transactions with an "R" (reconciled) status, which locks them against accidental edits.
If the difference isn't zero
Don't force it. A non-zero difference means something is wrong - a missing transaction, a duplicate, a wrong amount, or a transaction that was edited after a previous reconciliation. QuickBooks will let you "finish anyway" by creating a reconciliation discrepancy adjustment, but this is almost always the wrong move. Find the actual error instead.
Never Finish with a Discrepancy
When the difference isn't zero, QuickBooks offers to create an adjusting entry to force the reconciliation to balance. This is the accounting equivalent of sweeping dirt under the rug. The discrepancy doesn't disappear - it just gets hidden inside a "Reconciliation Discrepancies" adjustment that will haunt every future reconciliation. Always find and fix the actual problem.
What the transaction statuses mean
This is the detail most guides miss. When you match a bank feed transaction, it gets a "C" (cleared) status. It is not reconciled. Only the classic reconciliation process marks transactions as "R." This is why you can have a perfectly clean Banking tab with zero transactions in the For Review queue, and still have unreconciled months in your register. The bank feed did the data entry. The classic reconciliation does the verification.
Setting up bank rules
Bank rules automate categorization. Instead of manually categorizing every Verizon bill, every Gusto payroll debit, every Square deposit, you create a rule that handles it automatically. For businesses with a lot of recurring transactions, this is where the real time savings live.
Create a rule from the Banking tab
The fastest way: click on any transaction in the For Review tab, categorize it correctly, then click Create Rule from the expanded transaction view. QuickBooks pre-fills the rule conditions based on that transaction's description.
Or create manually via Settings > Rules
Go to Banking > Rules (or Settings > Bank Rules). Click New Rule. Give it a name that makes sense - "Gusto Payroll" or "Office Rent" rather than "Rule 47."
Set the conditions
Choose whether the rule applies to money in, money out, or both. Set conditions: bank text contains, doesn't contain, or is exactly a specific phrase. You can add multiple conditions with AND/OR logic. "Contains GUSTO" is usually more reliable than "Is exactly GUSTO TAX 1234567" because the exact text often varies between transactions.
Choose auto-add or prompt for review
This is the crucial decision. Auto-add means QuickBooks applies the rule and adds the transaction to your books without waiting for your approval. Add to For Review means QuickBooks pre-fills the category but waits for you to confirm. Use auto-add for transactions you're 100% certain about (the same amount from the same vendor every month). Use prompt-for-review for everything else.
Set the category, payee, and other details
Assign the account (category), payee/vendor name, class, and location if relevant. For tax purposes, also set the sales tax category if applicable. You can assign a specific memo that appears on every auto-categorized transaction - handy for audit trails.
Rule Priority Matters
Rules are evaluated in order. If a transaction matches multiple rules, the first match wins. Drag rules into the right order in the Rules list - put more specific rules above more general ones. A rule for "AMAZON WEB SERVICES" should come before a rule for "AMAZON," otherwise your AWS hosting costs will get categorized as office supplies.
Handling specific scenarios
The basic matching and reconciliation workflow handles 80% of transactions cleanly. The remaining 20% is where people get stuck.
Split transactions
When a single bank transaction covers multiple categories - a Costco run that was partly office supplies and partly client entertainment - click the transaction in the For Review tab and select Split. Add multiple lines with different categories and amounts. The total must equal the bank transaction amount. This is also how you handle a deposit that combines multiple customer payments into one bank entry.
Transfers between accounts
When you move money between two accounts that are both in QuickBooks (checking to savings, for example), the bank feed will show a withdrawal from one account and a deposit in the other. Do not categorize these as expenses and income. Instead, select Transfer from the transaction type dropdown and choose the other account. QuickBooks links the two transactions so they net to zero.
The Double-Transfer Trap
If you record a transfer from Account A, then also record a transfer from Account B for the same movement of money, you'll create a duplicate. The transfer should be recorded from one side only - QuickBooks automatically creates the corresponding entry on the other side. If you see the same transfer amount appearing as an unmatched item in both accounts, match (not add) the second one.
Undeposited Funds
This is the QuickBooks-specific concept that trips up more people than any other. Undeposited Funds is a holding account - a virtual "cash register" - that sits between recording a payment received and depositing it at the bank. If you use Receive Payment for an invoice, QuickBooks puts the money in Undeposited Funds by default. You then create a Bank Deposit to move those payments into your actual bank account.
Why does this matter for reconciliation? Because the bank feed shows one lump deposit (say, $3,450), but QuickBooks might have three separate Receive Payment entries ($1,200 + $750 + $1,500). You need to create a Bank Deposit grouping those three payments to match the bank's single deposit. Only then will the bank feed transaction have something to match against.
Skipping Undeposited Funds
If you deposit every payment individually (no batching), you can change the default deposit account on the Receive Payment screen directly to your bank account, bypassing Undeposited Funds entirely. This is simpler for businesses that don't batch deposits, but it means every payment creates its own deposit entry - which can clutter the register for businesses processing high volumes.
Customer payments and invoice matching
When a customer payment comes through the bank feed, you have two options. If you've already recorded the payment (via Receive Payment or a Sales Receipt), select Match to link the bank feed entry to the existing record. If you haven't recorded it yet, you can click Find Match to match it against an open invoice directly from the bank feed. QuickBooks will create the Receive Payment entry and link it to the invoice in one step.
Payroll transactions
If you use QuickBooks Payroll, payroll transactions should auto-match with the payroll entries QuickBooks has already created. If you use an external payroll service (ADP, Gusto, Paychex), you'll need to either enter a journal entry for each pay run or categorize the bank feed transactions to the correct payroll expense and liability accounts. A bank rule for your payroll provider is particularly useful here, since the amounts vary but the description pattern is usually consistent.
Tax payments
Sales tax payments (US) should be recorded using the Pay Sales Tax function so they properly reduce your sales tax liability. For VAT payments (UK), use the Pay VAT feature. Do not simply categorize a tax payment as a "Tax" expense from the bank feed - that records the payment as an expense rather than reducing the liability account, which will cause your balance sheet to drift and your next tax return to be wrong.
Month-end reconciliation workflow
A clean month-end close in QuickBooks follows a specific sequence. Skip a step and you'll spend twice as long finding the resulting discrepancy.
Clear the Banking tab first
Process all transactions in the For Review queue. Match what can be matched, categorize what needs categorizing, exclude what should be excluded. Get the count to zero for each account. This ensures all bank-imported transactions are recorded in your books before you start the formal reconciliation.
Run classic reconciliation for each bank account
Go to Settings > Reconcile. Work through each bank and credit card account. Enter the statement ending date and balance from your actual bank statement. Check off every matching transaction. Get the difference to $0.00 before finishing.
Review the Reconciliation Discrepancy report
Go to Reports and search for "Reconciliation Discrepancy Detail." This shows any transactions that were changed or deleted after being reconciled. If this report has entries, someone (or an automated rule) has modified a reconciled transaction. Investigate immediately - this is a common cause of opening balance discrepancies in future months.
Verify opening balances haven't shifted
When you start a new reconciliation, compare the beginning balance QuickBooks shows against the ending balance of your previous reconciliation. They should be identical. If they differ, a reconciled transaction was modified. The Reconciliation Discrepancy report (step 3) will tell you which one.
Save the reconciliation report
After finishing each reconciliation, QuickBooks offers to view and save the reconciliation report. Do it. Save a PDF copy. These are your audit trail - proof that you verified the books against the bank as of a specific date. If anything goes sideways later, this is your reference point.
Credit Card Reconciliation
Don't forget credit cards. They follow the same reconciliation process as bank accounts, but many businesses only reconcile checking accounts and ignore credit cards entirely. An unreconciled credit card account is an open invitation for duplicate entries, missed payments, and expense misclassifications to accumulate unnoticed.
Common QuickBooks reconciliation errors
Every bookkeeper has a mental catalog of reconciliation problems they've seen more than once. Here are the most frequent offenders in QuickBooks Online.
Opening balance discrepancy
The beginning balance doesn't match
This means a previously reconciled transaction was edited, deleted, or voided after the reconciliation was completed. QuickBooks shows a warning when this happens, but it's easy to miss.
Fix: Run the Reconciliation Discrepancy Detail report. It shows every transaction that was changed after reconciliation. Find the modified transaction, determine whether the change was intentional, and either reverse the change or create an adjusting entry to compensate. Then restrict editing permissions on reconciled transactions - Settings > Advanced > Accounting > Close the books.
Duplicate transactions from the bank feed
This happens in two ways. First: you manually enter a transaction (writing a check, recording an expense), and then the same transaction comes through the bank feed and gets added again instead of matched. Second: the bank feed itself sends duplicates, usually after a connection reset or a bank migration.
Fix: Before adding any bank feed transaction, always check whether it matches an existing entry. If duplicates have already been recorded, find and delete the duplicate (not the original) from the account register. For ongoing bank feed duplicates, disconnect and reconnect the bank feed, selecting a start date that avoids the overlap period.
"Undo Last Reconciliation" - when and how
QuickBooks Online lets you undo your most recent reconciliation for any account. Go to Settings > Reconcile, select the account, click the dropdown next to the Reconcile button, and choose History by account. Find the most recent reconciliation and click Undo.
Use this when you discover that the reconciliation you just completed was wrong - you checked off the wrong transaction, or you realize a transaction was duplicated. Don't use it casually. Undoing a reconciliation un-marks all those transactions as reconciled, meaning you'll need to redo the entire reconciliation from scratch.
You Can Only Undo the Most Recent
QuickBooks only lets you undo the last reconciliation for each account. If the error was two months ago, you'll need to undo the most recent month first, then undo the month before that, working backwards to the problem. This is why getting each month right the first time matters.
Categories changed after reconciliation
Someone recategorizes a reconciled transaction. The reconciliation status (R) stays, but the dollar amounts in your accounts have shifted. Your balance sheet and P&L are now wrong, even though the bank reconciliation still looks balanced. This is insidious because nothing in the reconciliation workflow flags it.
Fix: Enable "Close the Books" (Settings > Advanced > Accounting). Set a closing date and require a password to make changes before that date. This doesn't prevent changes entirely, but it adds a friction barrier that catches accidental edits.
Bank feed not connecting
Bank feeds break. Banks change their security protocols, Intuit's aggregation partner (Yodlee/MX) loses connectivity, multi-factor authentication prompts expire. When this happens, you lose the automatic transaction import.
Fix: First, try updating the bank connection (Banking tab > click the pencil icon on the account > Edit sign-in info). If that doesn't work, check QuickBooks' bank feed status page for known outages. As a temporary workaround, download a QBO, OFX, or CSV file from your bank's website and upload it manually via Banking > File Upload. This keeps your data flowing while the direct feed is being restored.
Transactions in the wrong period
A check written in January clears the bank in February. A payment received on March 31 shows on the bank statement dated April 1. These timing differences are normal and expected. During classic reconciliation, you simply don't check off transactions that aren't on this month's statement - they'll appear for reconciliation next month.
The mistake people make is changing the transaction date in QuickBooks to match the bank clearing date. Don't. The transaction date should reflect when the economic event occurred (when the check was written, when the payment was received). The reconciliation process handles timing differences by design.
When QuickBooks reconciliation hits its limits
QuickBooks' reconciliation tools work well for the standard case: one business, a few bank accounts, moderate transaction volume, consistent bank feeds. They start to strain in predictable ways.
High-volume accounts
Businesses processing hundreds or thousands of transactions per month find the line-by-line checkoff in classic reconciliation painfully slow. QuickBooks has no bulk-match capability in its reconciliation screen - every transaction is one click.
Multi-entity or multi-client reconciliation
Accounting firms reconciling dozens of client files each month face the same repetitive workflow multiplied across every client. QuickBooks has no cross-company reconciliation view or batch processing capability.
Complex matching requirements
Many-to-one matching (multiple payments aggregated into one bank deposit), partial matches, tolerance-based matching (the bank amount is $0.03 different from the book amount due to rounding) - QuickBooks handles none of these natively in its reconciliation screen.
Bank feed gaps or unsupported banks
When your bank doesn't support direct feeds (common with smaller regional banks, credit unions, and non-US banks), you're left manually importing files - and QuickBooks' CSV import is notoriously finicky about formatting.
For standard month-end reconciliation on a single company file, QuickBooks Online is fine. But if you're dealing with any of the situations above - high volume, multiple clients, complex matching, or problematic bank data - you'll likely find yourself looking for something that handles reconciliation at a different scale.
Tools like ReconcileIQ exist specifically for this gap: bulk reconciliation of bank statements against book data, with tolerance matching, many-to-one matching, and the ability to process months of transactions in minutes rather than hours. If you're spending more time clicking checkboxes in QuickBooks' reconciliation screen than you are actually investigating discrepancies, it's worth looking at whether the reconciliation step itself can be handled more efficiently.
Reconciling more than a few accounts?
ReconcileIQ matches bank transactions against book data in bulk - with tolerance matching, batch processing, and support for any bank format. Built for the volume that QuickBooks' native reconciliation wasn't designed to handle.
Try ReconcileIQ freeFrequently Asked Questions
How do I reconcile in QuickBooks Online?
Go to Settings > Reconcile, select the bank account, enter the statement ending date and balance from your bank statement, then match transactions. QuickBooks shows the difference between your records and the statement balance as you check off items.
What is the undeposited funds account in QuickBooks?
Undeposited funds is a holding account that groups received payments before they are deposited to the bank. If you record customer payments but they appear as a lump sum on your bank statement, you need to create a bank deposit in QuickBooks to move them from undeposited funds.
Why does QuickBooks show a reconciliation discrepancy?
Discrepancies usually come from transactions edited or deleted after a previous reconciliation, items coded to the wrong bank account, duplicate entries from bank feeds, or the opening balance being incorrect. Run the Reconciliation Discrepancy Report to identify changes.
How do bank rules work in QuickBooks Online?
Bank rules automatically categorise downloaded transactions based on conditions you set (description contains, amount is, payee matches). Go to Banking > Bank Rules to create them. QuickBooks applies matching rules to new transactions as they arrive from the bank feed.