Reconciliation - Direct Deposits

Daffy Duck

How do you handle the situation when doing a reconciliation where the bank statement recognizes the fact that direct deposits due on the first of the month are received a day or 2 early. I have already manually posted the entry based on the due date, however this does not show up as an available entry to check off in the reconciliation as it occurs in the next month?

jacobs

Others might have a different answer, but I would say you just need to make your Quicken data conform to what happened in the real world. So I would click on the direct deposit payment and change the date to the date you're seeing it in your bank account. And then it will be available for checking in your reconciliation.

If this always happens, I would change the date on your recurring deposit from the first of the (next) month to the last day of the (previous) month.

Chris_QPW

I'm curious on what Quicken Mac includes in its reconcile.
It sounds like it is the date that the user puts in, right?

In the case of Quicken Windows it uses the downloaded posting date that the financial institution sends.  And as such a transaction like this would be included.  But this is a double edge sword, people are surprised when transactions that have transaction dates (the main one in the register) that are in the reconcile period, but the downloaded posting date is outside of the reconcile period.

On the subject of what to do, I would do the same as @jacobs

jacobs

@Chris_QPW  The original poster said he "manually posted the entry based on the due date." So I don't think this has anything to do with downloading. If he manually entered the deposit with a date of November 1, and then tried to reconcile a statement as of October 31, if the deposit actually took place on October 30, it wouldn't appear in the list of transactions Quicken presents to check off.

On the other hand, if this does turn out to be about downloaded transactions, then Quicken Mac has a Preference setting (on the Preferences > Connected Services tab) to "Use posted date for matched transactions (instead of the date you enter manually)" -- checking that checkbox would make a downloaded transaction which has been matched to a manually-entered transaction switch to the posted date of the downloaded transaction.

Chris_QPW

Thanks @jacobs
That's nice that Quicken Mac gives the user the choice.

Daffy Duck

Thanks for your help. I concluded the easy solution is to adjust the reconcile date to the first of the next note. As I noted I am a brand new user. When I set up automatic downloads for my checking account Quicken adjusted the date to that recorded by the bank - so the problem goes away.

Daffy Duck

@Jacobs - You are correct as to the description of my original question. In the example you site the only solutions I have been able to figure out are either to extend the reconciliation period from October 31 to November 1 or go in and edit the date of the transaction.

I would think that this is a fairly common question as most payroll and Pension Payments that are due on the first of the month are paid electronically and are deposited in many months a day or more early. There are a variety of reasons why I might want to recognize the payment in the month that it is supposed to be received.

jacobs

@Daffy Duck I understand the situation. In business accounting, this often happens, for both revenues and expenses. In typical accrual accounting, entries to recognize the revenue and to recognize the receipt of money are separate transactions. So I could create an entry on December 1 to credit a revenue category and debit accounts receivable (or some other asset clearing account); separately, I could create an entry on November 29 to debit my checking account and credit accounts receivable (or the clearing account). That puts the cash in the bank account in November, and the revenue in December; between the two dates, it's held in the clearing account.

Or if the entry is done together in one month, it can be shifted to another month with two offsetting journal entries to accrue, or time-shift, the expense (or revenue) between the two months.

And you can do this in Quicken, too -- but I think it's more trouble than it's worth.

For instance, you could enter the receipt of the cash on November 30 in your checking account by categorizing it to a dummy category, and then on December 1, create a zero dollar transaction with an increase in your revenue category and a decrease in your dummy category. This would leave your November cash balance matching your bank statement, so you can reconcile in Quicken, but the revenue would show up in December where you want it. The two opposite entries to the dummy category will offset and total zero. But you'd have a value in your dummy category at the end of each month, until it is offset on the first of the following month, and you might not want this if you do revenue/expense reports. So the better way to do it would be to create a dummy (or clearing) account rather than a category. I have an Asset account in Quicken I call "Exchange". Now do the same as I wrote above, but the November 30 entry in your checking account would be a transfer to the Exchange account, and the zero dollar December 1 entry would be the split to increase your revenue category and an offsetting split to transfer from your Exchange account.

As I said, that's probably more accounting work than most Quicken users want to do to time-shift an entry -- but it's both workable and accurate.

But simply shifting your recurring deposit from the first of the month to the last day of the preceding month would allow you to reconcile without any further work. If this happens every month, then you'll have one month without the revenue, but going forward every subsequent month will have the one deposit at the end of the month, instead of one deposit at the beginning of the month. And if the deposit should actually arrive in your bank account "late" (say, on the 1st or 2nd of the month, instead of the 29th or 30th), you don't need to change anything in Quicken; you just don't check off that deposit when you're doing the prior month reconciliation.

If that all makes your head swim, here's the way I see the bottom line: to match the real-world bank statement, you have to record the deposit in Quicken in the month in which it actually happens. If you want to take extra steps to push the revenue into the next month, I've shared how to do so above.

Alternatively, as you've done, you can record the deposit in Quicken on the first of the month even though it happens earlier. And when you reconcile, give Quicken an incorrect reconcile date on or after the first of the month, so the deposit shows up in the list of transactions to be checked off.

smayer97

It may be stating the obvious but Quicken is not accounting software but personal finance software. As such, it operates on a Cash basis only, not an Accrual basis.

Cash basis is based on the date of the actual posted transaction. So any desire to make this work on an Accrual basis is a work-around, of which there are several ways, as some have pointed to above.

HOWEVER, a transaction that has a posted date by the FI can still match with a transaction date some days earlier. From a reconciliation perspective it may only show up in the subsequent reconciliation period BUT from a reporting perspective, reports work off the transaction date NOT the posted date. So for reporting purposes, you should still be ok to "recognize" the transaction in the desired period.

In other words, do not confuse the reconciliation period with the reporting period.

Daffy Duck

@smayer97 - I fully understand the difference between personal finance software and accounting software - and that points to more flexibility in personal finance software.

That flexibility should allow me to see entries outside of the period I am reconciling and check them off as complete rather than be forced into a very tight box - like a rigid accounting practice would do. Basically personal finance software should work like the old fashioned reconciliation that used to come on the back side of your bank statement every month.

Cutting things off on an absolute date is more like an accounting program.

[Removed] and earlier versions of Quicken would allow you to check off a transaction you had listed in the following month if it actually cleared on the statement you were reconciling to in the current month.

jacobs

@Daffy Duck  My guess is that showing transactions beyond the end date for the reconciliation would cause confusion and errors for more users than the use case you're describing. Just my guess. You could create a new Idea post asking for Reconcile to show dates past the end date entered for the reconciliation. This would probably need to be an option; imagine someone new to Quicken, or who has been away from Quicken for awhile, who has to reconcile going back many months. Or maybe the option could be "Show transactions up to [x] days past the statement ending date", with a default of zero.

smayer97

Quicken is designed to reconcile to your back statement or online transactions. Regardless of accounting rules or not, for there to be valid matches, it must be based on the posted date of a transaction. That is what is used to determine what shows up on your statement or online.

Quicken for Mac has used that approach for a very long time and for good reason because that is how reconciliation works... it is not based on fuzzy logic and date ranges. It is the only way to guarantee accurate and matching data between opening, closing and transactions totals, from one period to the next.

Daffy Duck

@smayer97 - I understand your point; But Quicken is not an accounting program. It is a program for amateurs to keep track of their finances. The ultimate goal of reconciliation is to assure our records are correct - and is a tool to get you there.

You appear to be assuming everyone gets all their entries via electronic download. I do all my credit card and checking account entries manually for example. Quicken needs to serve both Manual entries and Downloaded entriesl.

smayer97

I did not assume anything. I too ONLY enter all my transactions manually (mostly via scheduled transactions).

Daffy Duck

@smayer97 - Sorry - I apparently mis-interpreted your post.