What is Bank Reconciliation?

Bank Reconciliation is the process of matching transactions from your bank statement to entries in FreshBooks. This allows you to ensure your books accurately represent your bank accounts and that your funds are all accounted for.

Bank reconciliation should be completed at regular intervals for all your bank accounts, to ensure your business’ records are correct.

• Setting Up Your Bank Account
• Set an Opening Balance
• Reconciling Transactions
  • Match an Entry
  • Change the Date Range
  • Create a New Entry
  • Mark as Transfer
  • Mark as Owner's Equity
  • Mark as an Expense Refund
• Viewing Matched Transactions
• FAQs
  

To begin the bank reconciliation workflow, start with Setting Up Your Bank Account first, then Set An Opening Balance, before you start on Reconciling Transactions.

Setting Up Your Bank Account

1. Click on the Accounting section
2. Click on the Connect My Bank inside the Bank Reconciliation widget (if you’ve already connected any bank accounts previously, they’ll appear here)
   1. If you see your bank in the top 12 popular banks, click on it
   2. Otherwise, if you don’t see your bank, click on the Find your bank link below the top 12
      
   3. Then search for your bank using the name of the bank (at least 3 letters long), or the bank’s website link
   4. If the name of the bank and the bank’s website link matches what you normally log into online, click on the link
3. If your bank is not listed or available, please submit a request to have your bank added here
4. Once you’ve selected your bank, enter in your bank’s login credentials and press Submit
5. Answer any security/verification questions until all have been answered correctly and press Next
6. Wait for all your accounts to finish loading (all spinning icons disappear)
7. Once all accounts have finished loading, you can remove any unwanted accounts as well as rename any accounts (to help remember which account is which) using the Remove or rename account links
8. When you’re done, click on Import
9. A pop-up will ask you to how far back to import Expenses from - choose between Today, 7 Days ago, 30 Days ago, 90 Days ago, or custom (up to 90 days maximum)
10. Click Done
11. Once connected, click Okay, Got It
12. You’ll see a pop-up letting you know when you have expenses to start matching
13. If you want to connect other accounts, repeat steps 1-2 above with the Connect Another Bank Account button instead.

If you’re experiencing issues connecting your bank account, check out our troubleshooting article here.

Set an Opening Balance

Once you have a bank account (or several) connected, you’re ready to set the opening balance which will determine the amount you’ll start reconciling with moving forward. Your invited Accountant can also help you with this set up:

1. Click on the Accounting section
2. You’ll now see your bank account(s) listed in the Bank Reconciliation widget, click on the Set your opening balance link
3. In the field provided, enter a date to start reconciling from (we recommend the first day of a recent bank statement or the start of a period on your credit card statement)
4. Click Continue
5. Enter your Opening Balance from the day you chose to start reconciling in the field
   1. If you’re setting up a credit card account, this is your Previous Statement Balance (if you’ve paid off your credit card balance, this would be $0)
6. Choose the Currency of your bank account you’re reconciling
7. Then click Continue again
8. You’re now ready to start reconciling this account. Click Get Started to begin.

Reconciling Transactions 

Once a bank account is set up with an opening balance, you can start matching transactions, which is the reconciliation process.

To get started, begin with the below steps:

1. Click on the Accounting section
2. You’ll now see your bank account(s) listed in the Bank Reconciliation widget, click on the x left to match link
3. FreshBooks will automatically match transactions for you
4. 1. If you see matches that are actually bank transfers or incorrectly matched, click on the checkmark to deselect it
   2. If you see matches that are correctly matched and there is nothing to change, keep it checked off
5. Click Confirm and Continue to proceed.

Any remaining unmatched transactions will need to be matched by you next. Depending on what kind of transaction you need to match, choose from the below options and follow the specified steps:

• Match an Entry
• Change the Date Range
• Create a New Entry
• Mark as Bank Transfer

Match an Entry

If you see the corresponding entry (or multiple entries) in the FreshBooks Entries section, use these steps:

1. In the Bank Account Transactions section on the left, check off a transaction
2. Then in the FreshBooks Entries section on the right, use the search bar if you need to find your entries, and check off one or several entries that match
3. Click on the Match button.

Change the Date Range

This is useful if the ones you’re looking for are not listed because they fall outside of the date range.

1. Click on the settings icon on the right side of the search bar under FreshBooks entries
   
   
2. Choose a new Start and End date
3. If needed, you can specify the Entry Type (Payments & Other Income only, Check payments only, Expenses only)
4. Click Apply to save and new entries should appear on the right
5. In the Bank Account Transactions section on the left, check off a transaction
6. Then in the FreshBooks Entries section on the right, check off one or several entries that match
7. Click on the Match button.

Create a New Entry

If the FreshBooks entry doesn’t exist yet, you can create it with these steps:

1. Under FreshBooks Entries, click on the Create a New Entry link
   
2. Then choose from Expense, Other Income, or Payment depending on what kind of matching entry you need to create
3. Once saved, this entry will now appear in the list of FreshBooks Entries
4. Check off the entry or entries that you’ve just created
5. Click on the Match button.

Mark as Transfer

If the transaction is a transfer to pay off a balance in another account (e.g., bank transfer for credit card debt), you can mark it as a transfer without needing to match it to a FreshBooks Entry:

1. Check off the box next to the Bank Account Transaction
2. Click on the Mark As button at the top
3. Select Transfer
   
4. Enter details on the transfer as needed in the Note box
5. Click Submit to finish and the Bank Account Transaction will no longer appear as an option to match. The corresponding imported Expense on the FreshBooks Entries side will also be deleted automatically.

Note: These transactions can be found by going to the Matched tab and going to the very last page.

New transactions will be imported in daily from your bank account(s), so you can continue matching up transactions on your own schedule, whether that’s daily, weekly, monthly or at a different frequency.

Mark as Owner’s Equity

If the transaction is from either:

• Withdrawing funds for personal use (Owner's Draw)
• Depositing funds from a personal account to a business account to help with cash flow or funding

You can mark these as Owner's Equity with the below steps:

1. Check off the box next to the Bank Account Transaction
2. Click on the Mark As button at the top
3. Select Owner’s Equity
4. Enter details on the equity as needed in the Note box
5. Click Submit to finish. The Bank Account Transaction will no longer appear as an option to match. The corresponding imported Expense will also be deleted automatically.

Note: Once marked as Owner’s Equity, these transactions will be located inside the Owner’s Equity account on the Chart of Accounts.

Mark as an Expense Refund

If the transaction is funds you received from a vendor when returning an Expense, you can use the Mark as an Expense Return option. This will also reduce the amount in your Operating Expenses on your Chart of Accounts. Use the below steps:

1. Check off the box next to the Bank Account Transaction
2. Click on the Mark As button at the top
3. Select Expense Refund
4. Check the box off if you want to Mark refund as Cost of Goods Sold
5. Next, choose the Refunded Expense Category
6. Then enter details about the return as needed in the Note box
7. Click Submit to finish. The Bank Account Transaction will no longer appear as an option to match. The corresponding imported Expense will also be deleted automatically.

Note: Once marked as an Expense Return, these transactions will be located inside the original Operating Expenses account on the Chart of Accounts.

Viewing Matched Transactions

All matched transactions, including those marked as bank transfers, can be viewed with the below steps:

1. Click on the Accounting section
2. Click on the x left to match link for the account you want to review in the Bank Reconciliation Widget
3. Click on the Matched sub-tab.

All "Mark as Bank Transfer" transactions will be grouped together on the last page of your matched transactions.

If you’ve accidentally matched the wrong transactions together, you can unmatch them by checking off the box(es) next to the match(es), and clicking on the Unmatch Transactions button above the list.

The transactions from this match will then appear in the Unmatched sub-tab for you to reconcile correctly.

FAQs  

I received a partial reimbursement/return on an Expense. How do I match this?

Note: If you are exporting your Reports each month to close your books, we recommend using Journal Entries to accommodate for this reimbursement or return.

Otherwise, if you do not export Reports to close your books each month, use the below steps:

1. Edit the original Expense down to the new total after reimbursement
2. Find the original matched expense and unmatch it with the steps in Viewing Matched Transactions above
3. In the Unmatched section, you can now match the reimbursement from your Bank Transaction to the original matched expense.

In this case, both the original Bank Transaction (originally - $500) and the new reimbursement Bank Transaction (+ $250) will now match up with the FreshBooks Transaction of (- $250).

I refunded an Invoice payment partially/in full. How do I match this?

Note: If you are exporting your Reports each month to close your books, we recommend using Journal Entries to accommodate for this reimbursement or return.

Otherwise, if you do not export Reports to close your books each month, use the below steps:

Full Invoice Refunds

1. Find the original matched Invoice payment and unmatch it with the steps in Viewing Matched Transactions above
2. In the Unmatched section, match the Invoice payment from your Bank Transaction with the refund from your Bank Transaction
3. Then using the steps in Reconciling Transactions, create a $0 payment to match with the two Bank Transactions.

In this case, both the original Bank Transaction (originally + $800) and the refund Bank Transaction (- $800) will now match up with the FreshBooks Transaction of ($0).

Partial Invoice Refunds

1. Edit the payment on the Invoice to reflect the partial refund.
2. Find the original matched Invoice payment and unmatch it with the steps in Viewing Matched Transactions above
3. In the Unmatched section, you can now match the partial refund from your Bank Transaction to the original matched Invoice payment.

In this case, both the original Bank Transaction (originally + $800) and the partial refund Bank Transaction (- $300) will now match up with the FreshBooks Transaction of ($500).