Automatic Bank Feeds in QuickBooks Online

There’s a trend among some users of QBO to consider automatic bank feeds as a way to eliminate reconciling of the accounts. This is wrong, so wrong, and I’d like to tell you why.

1. You can’t trust them. They work well, when they’re working, but too often I see bank activity downloaded into QBO that leaves out transactions.

2. The automatic features in QBO make for simple use, but if you just accept all transactions as they download, there’s the potential for misclassification. For example, QBO will remember what the previous expense was for a vendor, and will fill it in. However, that may not be the correct expense at all.

3. Income downloading is especially tricky if you’re unfamiliar with it. If you issue invoices, you should be receiving payments from the Transactions menu. If you don’t, and QBO downloads those deposits, it won’t have anything to match to. Many times I’ve found that these transactions have ended up as Income, when there’s already an invoice for it. This will quickly double your income, in ways that we don’t want it to double. (We want to double it by increased sales, not by tricking the books.)

4. If you have multiple deposit items on a deposit, such as several checks, QBO will need you to manually match those deposits to the received payments. For example, if you receive large numbers of merchant deposits, QBO will enter those as income if you don’t match them. I will often just exclude the credit card deposits because if everything else is done properly, they’re already accounted for. If they match, even better.

5. If you have many transfers between bank accounts, there’s a high likelihood QBO will be so confused that these will not end up in the right place without intervention. Often these transactions will show up as an Other Asset, or an Uncategorized Expense, and if you have multiple accounts with transfers between them, you must verify the transactions before accepting it into your books.

6. And last of all, you can’t trust them. I know I said this before, but it’s such an important detail. Even with all the technology working in our favor, we need to verify. We need to reconcile. We need to look at what’s showing up, and we need to make sure it’s properly classified. Otherwise, we might as well be entering random numbers.



There’s a reason us accountants do the things we do, and it’s not because we like to fill our time with busywork. It’s because verifying and reconciling are the best methods we have to ensure that every transaction in our books is proper, classified correctly, and is placed where it belongs. It may seem time consuming, but it takes twice as long to fix past errors than it does to get them right the first time. More time = more money, and there’s much to be said for having accurate financials when you need them.

Clearing and Suspense Accounts

What are these? There can be a lot of confusion about how to use a clearing account, or why. A clearing account may be referred to as a suspense account, or an Ask Accountant account, or an Ask Client account. On your own books, you can call these accounts whatever you wish. There are really two different ideas around these terms:

A SUSPENSE account is often used as a temporary holding account for transactions, such as when we have a question about what a transaction is for, and therefore which account it should go in, or we need to talk to the client about it. (Or your bookkeeper, if you’re on the other side.) QB will often call these Uncategorized Income or Uncategorized Expense, or Ask My Accountant, depending on the QB version. At year end, this account should be at zero. Even better is to have this account zeroed out at every month-end close.

If I’m entering transactions for a client and have only check numbers and amounts from a bank statement, I’ll put these transactions into a suspense account until I can get the information on who the checks were written to. I’d rather have the amounts entered and be able to reconcile and fill in the blanks later. It’s faster, for me, than waiting for all the information.

A CLEARING account is used when we’re cleaning up accounts but due to the type of transactions, we need an account to run transactions through. For example, if you have barter transactions we would use the clearing account to post the income and expense transactions. A clearing account is also very useful to clear AR and AP transactions. Since QB does not allow multiple AR or AP accounts in one journal entry, using a clearing account to post to can be a lifesaver. It’s a valid work-around for some of the limitations we run into when using software.

The difference in the Suspense and Clearing accounts is that the suspense account transactions will be changed to their proper account, leaving no transactions in this account. In a clearing account, however, the transactions will remain in the account but the account balance will be zero at the end of the reporting period. QB uses Opening Balance Equity as a clearing account when setting up a new file.

Most of us who do this every day have our own methods for where we want to put these accounts in the chart of accounts, and what we call them. Some of us like to keep them as an expense or income account, and as long as the account is zero at the end of the reporting period, that’s fine. Others like to put them on the balance sheet, so they’re very obvious. These accounts should not be on the financial statements because they don’t tell us any useful information, except that there issues that need to be resolved.