What Is Bank Reconciliation?
Bank reconciliation compares transactions recorded in your FreshBooks account against those listed on bank or credit card statements. This process ensures your internal records match what your financial institutions have processed. Regular reconciliation maintains accurate financial statements while helping detect fraud, minimize errors, and simplify tax preparation.
When a deposit, expense, or fee appears on your bank statement but not in FreshBooks, you must investigate and correct this discrepancy. Matching credit card payment transactions against your accounting records confirms that your FreshBooks balance matches your actual bank account balance.
The reconciliation process categorizes payments and expenses based on how they affect your bank account balance. Unreconciled transactions appear on the left side of the reconciliation screen, while FreshBooks entries display on the right. Successfully matching these two lists completes the reconciliation process.
FreshBooks Reconciliation Features
FreshBooks offers powerful features designed for efficient transaction reconciliation. These tools streamline the process and help maintain accurate financial records without unnecessary complexity.
Transactions imported via bank connections initially appear as unmatched. These represent deposits, invoice payments, transfers, and expenditures processed by your bank. You might have already entered invoices or expenses manually, imported them via CSV, or recorded them through unconnected payment methods. The reconciliation screen displays these as FreshBooks entries needing to be matched with corresponding bank transactions.
When bank transactions have corresponding FreshBooks entries, you can match them following simple steps. Some transactions may not require matching entries, such as bank transfers, equity adjustments, or expense refunds. These can be marked accordingly, clearing them from the "Unmatched Transactions" list and completing that period's reconciliation.
Properly matched and marked transactions feed into your financial reports, including Profit & Loss (P&L), General Ledger, and Trial Balance. Editing or deleting a FreshBooks entry may cause a transaction to become unmatched, requiring re-matching. Regular reconciliation checks prevent reporting errors and maintain accurate financial records.
Step-by-Step Credit Card Reconciliation
The reconciliation process requires attention to detail but becomes straightforward with practice. Following these steps ensures your credit card payments are properly reconciled in FreshBooks.
Before diving into specific steps, understand that reconciliation works best as a regular practice rather than an occasional task. Consistent reconciliation prevents errors from accumulating and makes the process much more manageable.
Connect Your Accounts
Connecting your business bank account or credit card to FreshBooks creates an automatic import channel for your transactions. This connection significantly reduces manual data entry and potential errors.
Log into FreshBooks and select "Banking" or "Accounting" from the left navigation menu. Click "Add Bank Account" and follow the prompts to securely connect your financial institution. Once connected, FreshBooks automatically imports transactions from the supported date range, though transactions older than 90 days might require manual addition or CSV import.
Review Your Transactions
After connecting your accounts, all credit card transactions appear on the reconciliation screen. This view provides a comprehensive overview of your financial activity that needs reconciliation.
The left side shows imported bank transactions awaiting matching, while the right side displays FreshBooks entries from manual entry, CSV imports, or alternate payment methods. Review these transactions carefully, looking for discrepancies like duplicate entries, mismatched amounts, or transactions appearing in only one location.
Match Transactions
With transactions from both sources visible, you can begin matching them to confirm their accuracy. This process forms the core of reconciliation work.
Identify a credit card payment on the left side, which might be client payment or an expense. Use FreshBooks search or filter tools to find the corresponding entry on the right side. Check boxes next to both the bank transaction and related FreshBooks entry, then click "Match" to link them formally.
Once matched, the transaction moves out of the unmatched list, and your FreshBooks balance updates automatically. Continue this process for all transactions until everything is either matched or appropriately marked.
Handle Special Transactions
Not every transaction requires a matching FreshBooks entry. Some represent transfers between accounts or other special cases that need different handling.
For transfers between bank accounts, select the transaction and click "Mark As" then choose "Transfer." For owner's equity additions or expense refunds, select the appropriate option from the marking menu. These markings help FreshBooks adjust account balances correctly, identifying them as either "Owner's Equity" or "Expense Refund" in the FreshBooks Entry column.
This proper categorization ensures special transactions are clearly identified and don't interfere with regular credit card payment matching.
Address Unmatched Items
Some transactions may remain unmatched after your initial reconciliation pass. These require special attention to maintain accurate records.
Unmatched items might include entries imported via CSV but not processed through bank connections, or expenditures paid with unconnected methods. You can leave these in the "Unmatched" section temporarily. As more data imports into your account, you might reconcile these later or adjust them manually if they represent errors.
Verify Your Balances
After matching and marking all relevant transactions, check the totals at the top of the reconciliation screen to confirm accuracy. This verification step ensures nothing was missed.
The "Bank Account Balance" shows your opening balance plus all imported transactions to date. The "FreshBooks Balance" comprises your opening balance plus reconciled transactions and journal entries. Both balances should match exactly. If discrepancies remain, double-check for missing transactions, duplicates, or opening balance issues.
Generate Reconciliation Reports
Creating a Bank Reconciliation Summary Report provides documentation of your work and highlights any remaining issues. This report serves as an important verification tool.
This summary shows any remaining unmatched transactions across all connected accounts. Review this report before finalizing your monthly or quarterly reconciliation to ensure everything balances properly. The report also serves as valuable documentation for audit purposes or future reference.
Successful Reconciliation Strategies
Implementing proven strategies makes credit card reconciliation more efficient and accurate. These approaches help prevent common problems and streamline your accounting workflow.
Frequent reconciliation catches errors early and prevents discrepancies from growing. Consider reconciling weekly or even daily for high-transaction businesses rather than waiting until month-end. This regular cadence makes each reconciliation session shorter and simpler.
Double-checking your opening balance ensures your reconciliation starts from an accurate foundation. When first connecting accounts, verify that your FreshBooks opening balance matches your actual bank balance. For older transaction imports, you might need manual opening balance adjustments to ensure accuracy.
Expert FreshBooks Reconciliation Tips
Accounting professionals who use FreshBooks regularly have developed valuable insights for efficient reconciliation. Their experience can help you avoid common pitfalls and streamline your process.
Set a Regular Schedule: Dedicated reconciliation time each week prevents backlog and ensures nothing gets overlooked. This consistent approach turns reconciliation from a dreaded task into a routine part of financial management.
Use Self-Serve Tools: FreshBooks provides capabilities to add, edit, delete, or unmatch transactions when needed. These controls help refine your bookkeeping and correct errors quickly when discovered.
Monitor Special Accounts Separately: Petty cash or other specialized accounts should have their own reconciliation process. These accounts typically operate differently from main business accounts and require separate attention to maintain accuracy.
Common Reconciliation Questions
Many users encounter similar challenges when reconciling credit card payments in FreshBooks. These answers address the most frequently asked questions about the reconciliation process.
What Causes Payment Mismatches?
Credit card payment mismatches often result from several common factors that can be easily addressed once identified.
Discrepancies between FreshBooks entries and bank transactions might stem from processing fees, exchange rates, or partial payment splits. Banks sometimes apply additional fees that don't appear in your original transaction records. You can edit transaction details in FreshBooks to reflect the correct amount, ensuring proper matching.
Currency conversion rates may also cause slight differences between recorded and processed amounts. For international transactions, verify that the final processed amount matches what you're trying to reconcile. Partial payments might need to be matched with multiple FreshBooks entries to reconcile properly.
How to Fix Matching Mistakes?
Correcting mistakenly matched transactions requires a simple process that allows you to start fresh with the problematic items.
Navigate to your list of matched transactions and check the box next to the incorrect match. Click "Unmatch Transactions" to separate them, which returns both items to the unmatched list. You can then match them correctly with their proper counterparts.
This unmatch feature provides flexibility when you discover errors or need to reorganize your reconciliation. The ability to correct mistakes without complex workarounds makes maintaining accurate records much easier.
Why Might Opening Balances Differ?
Opening balance discrepancies often indicate fundamental reconciliation issues that need addressing before proceeding further.
Check that your FreshBooks opening balance exactly matches the ending balance from your previous bank statement. Review whether any transactions were omitted during CSV imports or haven't been processed through the bank connection. Sometimes timing differences between when transactions are recorded and when they clear the bank can cause temporary discrepancies.
Adjusting your opening balance might be necessary if you're starting reconciliation mid-cycle or have historical transactions that weren't previously reconciled. Getting this foundation right ensures all subsequent reconciliations build on accurate information.
FreshBooks Reconciliation Benefits
FreshBooks offers numerous advantages for credit card payment reconciliation compared to manual methods or other software. These benefits save time while improving accuracy.
Automated Transaction Imports: Bank and credit card connections automatically bring in your latest transactions, reducing manual entry and lowering error risk. This automation saves considerable time and ensures you're working with complete transaction data.
User-Friendly Matching Interface: The dual-column reconciliation screen allows quick transaction matching. When you select a bank transaction and its corresponding FreshBooks entry, the software handles alignment instantly, streamlining the entire process.
Comprehensive Reporting Options: After matching credit card payments and other transactions, FreshBooks generates updated financial reports like Profit & Loss statements. These reports provide accurate business insights based on properly reconciled data.
Troubleshooting Reconciliation Issues
Even with FreshBooks' intuitive design, reconciliation challenges occasionally arise. These troubleshooting approaches help resolve common reconciliation problems.
Duplicate Transactions: Bank imports sometimes create duplicate entries that complicate reconciliation. Run the General Ledger or Trial Balance reports to identify duplicates, then use FreshBooks' editing features to remove them. Careful review prevents these duplicates from affecting your financial reporting.
Delayed Transactions: Some transactions remain in transit, especially those processed near statement cutoff dates. Allow sufficient time for these to clear before considering them problematic. For persistently unmatched items, investigate whether bank fees or system delays might be responsible.
Unrecognized Fees: Banks occasionally apply fees that don't appear in your FreshBooks records. Review your statements carefully for these charges and create corresponding FreshBooks entries when necessary. Proper fee accounting ensures complete reconciliation and accurate expense tracking.
The following numbered list outlines critical steps to take when your reconciliation doesn't balance:
- Compare your bank statement ending balance with the FreshBooks reconciliation total to identify the exact discrepancy amount.
- Search for transactions matching the discrepancy amount, as this often indicates a single missing or duplicate item.
- Review recently added manual transactions for potential data entry errors in dates or amounts.
- Check for transactions marked incorrectly as transfers or expense refunds that should be regular expenses.
- Verify that all bank fees and interest payments appear in both your bank statement and FreshBooks records.
Start Reconciling Credit Card Payments Today
Mastering credit card payment reconciliation in FreshBooks creates a solid foundation for accurate financial management. The process becomes routine with practice and delivers significant benefits to your business operations.
Regular reconciliation prevents small errors from becoming major problems and gives you confidence in your financial reporting. When your books accurately reflect your actual financial position, you make better business decisions based on reliable information.
FreshBooks makes reconciliation accessible even for those without accounting backgrounds. The intuitive interface, automated imports, and flexible matching tools simplify what was traditionally a complex process. Take advantage of these features to maintain pristine financial records without spending excessive time on bookkeeping tasks.
Remember that consistent reconciliation habits yield the best results. Schedule regular sessions rather than attempting massive catch-up efforts. This approach distributes the workload and makes reconciliation a manageable part of your routine financial management.
