Managing your business’s bank transactions efficiently is key to maintaining accurate financial records, and QuickBooks Online (QBO) offers a streamlined way to handle this with the Bank Feeds feature. With bank feeds, you can directly connect your bank and credit card accounts to QuickBooks Online, automatically importing transactions for easy reconciliation. However, to ensure your books remain accurate, you need to match and categorize these transactions properly.
What Are Bank Feeds in QuickBooks Online?
Bank Feeds in QuickBooks Online allow you to connect your business’s bank and credit card accounts directly to QuickBooks Online. Once connected, your transactions (debits, credits, deposits, withdrawals, etc.) are automatically imported into QuickBooks Online. This feature saves time, reduces manual data entry, and helps ensure your financial records are up to date.
However, to ensure your transactions are categorized properly, you must review, match, or categorize them, which is where the matching and categorizing process comes in.
Step 1: Connect Your Bank Account to QuickBooks Online
Before you can match and categorize your bank feeds, you first need to connect your bank account to QuickBooks Online.
1. Go to the Banking Tab:
From the left navigation panel in QuickBooks Online, click on Banking or Transactions, then select Banking.
2. Add Your Account:
Click Link Account in the upper-right corner.
Choose your bank from the list or search for it by name.
Enter your online banking credentials (username and password), then click Connect.
Once connected, QuickBooks Online will automatically start importing transactions from your bank account.
3. Review and Import Transactions:
Depending on how far back QuickBooks Online can access your bank transactions, you may need to select a start date for the bank feed.
QuickBooks Online will begin downloading the transactions and display them in the For Review tab of the Banking section.
Step 2: Understand the Bank Feed Process
Once your transactions are imported, they will show up under the For Review tab in QuickBooks Online. At this point, you need to categorize them into the appropriate accounts and match them to existing transactions (such as invoices, bills, or previously recorded payments) when necessary.
Step 3: Match Transactions
The "Match" process is when QuickBooks Online automatically finds an existing transaction (invoice, bill, payment, expense) that corresponds to the bank feed transaction. This is important for maintaining accurate accounting records and ensuring you’re not duplicating transactions.
How to Match Bank Feed Transactions:
1. Go to the Banking Tab:
Navigate to the Banking section in QuickBooks Online, then go to the For Review tab.
2. Review the Transaction:
QuickBooks Online will show you the details of the bank feed transaction, including the date, amount, and vendor or customer name (if available).
QuickBooks Online may also try to suggest a match if there’s an existing transaction that matches this deposit or payment (like an invoice or bill payment).
3. Match the Transaction:
If QuickBooks Online suggests a match, confirm first that the match is appropriate. If not, use Categorize (see below).
If there is no suggested match or you don’t see an exact match, click Find Match to search for a potential match manually.
You can search by transaction amount, date range, or customer/vendor name to find an invoice or bill that corresponds to the bank feed transaction.
Once you’ve found the correct match, check the box next to the transaction and click Save.
4. No Match? (Use "Categorize" Instead)
If you can’t find a match, you’ll need to categorize the transaction manually, which we’ll discuss in the next section.
Step 4: Categorize Transactions
When QuickBooks Online can’t automatically match a transaction to an existing record, you’ll need to categorize it yourself. Categorizing involves assigning the bank feed transaction to the appropriate account in your chart of accounts.
How to Categorize Bank Feed Transactions:
1. Go to the For Review Tab:
In the Banking section, locate the un-matched transaction in the For Review tab.
2. Select the Transaction:
Click on the transaction to open it and review the details.
3. Choose a Category:
In the Category field, select the appropriate account from your chart of accounts. Common categories include:
Expenses: For business-related purchases or bills.
Income: For customer payments, sales, or deposits.
Owner’s Equity or Draw: For personal withdrawals or transfers to/from the business.
Bank Fees: If you’re charged bank fees like monthly maintenance or overdraft fees.
QuickBooks Online will also let you add a Description and attach receipts if needed.
4. Add a Vendor or Customer (Optional):
You can also select a vendor or customer associated with the transaction, which helps with accurate reporting and reconciliation.
5. Add Rules for Automatic Categorization (Optional):
If certain types of transactions happen frequently (like regular utility bills or subscription payments), you can set up bank rules to categorize them automatically in the future. To do this, click on Banking Settings (gear icon), select Bank Rules, and create a rule based on criteria like the transaction description, amount, or payee.
6. Save the Transaction:
Once you’ve categorized the transaction correctly, click Add to add it to your books.
Step 5: Maintain Consistency
To ensure smooth financial management, it’s important to consistently review, match, and categorize transactions. Regularly updating your bank feeds in QuickBooks Online will make your reconciliation process faster and more accurate, preventing any surprises when it’s time to prepare financial reports or file taxes.
Conclusion
Matching and categorizing bank feeds in QuickBooks Online is a critical task that helps ensure your business finances are accurately reflected in your accounting system. By connecting your bank accounts, reviewing imported transactions, and categorizing them properly, you save time, avoid mistakes, and keep your financial records clean. Remember to reconcile regularly to ensure that QuickBooks Online is in sync with your actual bank balances. This process, when done consistently, will give you better control over your business’s financial health and make year-end reporting or tax filing a breeze.