Bank Account Cleanup and the Chart of Accounts

1. 1. Bank Reconciliation Cleanup

   🔎 Step-by-Step: Identify Issues

   1. Run the Reconciliation Report for each bank and credit card account:

      • Go to Accounting > Reconcile > History by Account

      • Look for:

        • Missing months

        • Partially reconciled accounts

        • Reconciliations with large discrepancies

   2. Check the Register for Uncleared Transactions:

      • Go to Accounting > Chart of Accounts > View Register

      • Filter for transactions older than 30 days that are still uncleared.

      • Look for:

        • Duplicate entries

        • Manual journal entries

        • Transactions without matching bank feeds

   3. Review Undeposited Funds:

      • Run a Balance Sheet and click into Undeposited Funds

      • Look for:

        • Stale transactions

        • Duplicate payments

        • Customer payments that were never deposited

   4. Check Bank Feed Rules:

      • Go to Banking > Rules

      • Look for overly broad or conflicting rules that may be auto-categorizing transactions incorrectly.

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   🛠️ Step-by-Step: Fix the Issues

   1. Reconcile Missing Months:

      • Use the bank statement to manually match and check off each transaction.

      • Ensure the ending balance and date match the statement.

      • Reconcile each month chronologically.

   2. Clear or Delete Stale Transactions:

      • Match manually if transactions weren’t auto-matched.

      • Delete duplicate entries if confirmed.

      • Void or reverse if necessary, but retain audit trail.

   3. Clean Undeposited Funds:

      • Create missing Bank Deposits from open payments.

      • Use Receive Payment properly to apply against invoices.

      • Avoid posting customer payments directly to income.

   4. Tighten Bank Rules:

      • Edit or delete rules that cause misclassification.

      • Set clear conditions (e.g., bank text contains AND amount is).

      • Use Auto-add only when 100% confident in the rule.

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   ✅ Best Practices

   • Lock previous periods to prevent changes post-reconciliation.

   • Reconcile every month before the 15th of the following month.

   • Always reconcile both bank and credit card accounts.

   • Use the Reconciliation Discrepancy Report for prior changes.

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   🧾 2. Chart of Accounts (COA) Cleanup

   🔎 Step-by-Step: Identify Issues

   1. Export Chart of Accounts:

      • Go to Accounting > Chart of Accounts > Export to Excel

      • Look for:

        • Duplicate or similar account names

        • Inactive accounts with balances

        • Uncategorized transactions (e.g., in “Ask My Accountant”)

   2. Review for Misclassifications:

      • Check if accounts are labeled correctly as Income, Expense, Asset, Liability, or Equity.

      • For example, payroll clearing accounts shouldn’t be categorized as expenses.

   3. Analyze Naming Conventions:

      • Check for inconsistency in naming (e.g., “Utilities – Internet” vs “Internet Expense”).

      • Look for redundant sub-accounts or overuse of nesting.

   4. Run Reports for Improper Posting:

      • Use Profit & Loss and Balance Sheet Detail to see what’s posting where.

      • Run General Ledger Report to find misclassified entries.

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   🛠️ Step-by-Step: Fix the Issues

   1. Merge Redundant Accounts:

      • Go to the Chart of Accounts, edit one account name to match the other exactly.

      • QuickBooks will prompt to merge.

      • WARNING: This cannot be undone.

   2. Reclassify Transactions:

      • Use the Reclassify Transactions tool (available in Accountant view).

      • Move incorrectly posted items to proper accounts.

   3. Create a Logical COA Structure:

      • Group accounts by function (e.g., Office Supplies, Software under Admin Expenses).

      • Use 4-digit account numbers if needed for clarity.

      • Avoid unnecessary sub-accounts unless they support reporting.

   4. Inactivate Unused Accounts:

      • Only after balance is zero and not used in current rules or templates.

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   ✅ Best Practices

   • Maintain a lean COA (ideally under 100 accounts total).

   • Ensure accounts tie directly to your financial reports and tax return lines.

   • Create a COA mapping template for consistency across clients or entities.

   • Lock the COA structure after cleanup to prevent user drift.