Sage Words

This post is a follow up to my blog, Bank Reconciliation Made Easy: Part I.  In Part I, I explain how to spot differences between your bank and cash balances and how to handle them.

No time to read Part I? Then know reconciling a bank statement is simply comparing your organization’s cash records to the monthly statement provided by the bank. Reconciling is typically a monthly process and is an important part of managing your organization’s finances.

In this post I discuss what to do after you have gone through the reconciliation process and still something is off.  In this hypothetical situation, I assume you have:

• Listed your bank balance and identified the deposits in transit and outstanding checks.
• Identified any bank errors.
• Listed your cash general ledger balance for the same ending date as the bank statement and,
• Identified bank services charges and fees and any interested paid by the bank on the account.

Yet, the two balances are still different!?!

Now what?

If your balances are different, the short answer is – something is missing. Something is either in the cash balance and not on the bank statement or on the bank statement and not in the cash balance.

Ideally, your accounting application should have reports available to assist with analysis. Cash journals, check registers, and reports that list all checks, deposits, and other cash items are useful in tracking down the offending items. The ability to filter reports to see only outstanding checks or deposits as of a certain date is a handy feature in reporting.  For your follow up “reconciliation review” be sure and

1. Identify missing checks. Is a cleared check missing from the cash general ledger? Determine if the check is incorrectly dated in your system, perhaps with a date earlier or later than the month you are reconciling. Perhaps a check needs to be voided?
2. Identify missing deposits. Does the bank list a deposit not on the cash general ledger? Does the cash general ledger list a deposit not on the bank statement? Identify the deposit and determine the correct steps.
3. Identify journals or other transactions entered to cash and not reflected on the bank statement. The reason for these entries will determine your next step: is there an error? Does a correcting journal need to be prepared and entered?
4. Look for bank errors. Yes, they happen. Some banks still enter check amounts manually! Look for checks or deposit amounts that vary from your records.

Next, examine the list of adjusting entries.  Are the outstanding checks old? Do you need to void or reissue any checks? Are missing deposits simply timing issues or do you need to develop a policy to handle cash transactions in a timely manner? Are employees cashing payroll checks in a timely manner? Would implementing direct deposit create a more efficient process, saving time and preventing lost checks?

Sage 100 Fund Accounting provides advanced reporting tools to facilitate total cash management. The Bank Reconciliation feature provides a tab specific to track suspense items, such as bank errors and or disputed transactions. The Data/Import Export module allows bank data to be imported and automatically cleared. Sage 100 Fund Accounting also offers a Direct Deposit module, which integrates with the Bank Reconciliation feature.

Regardless of the accounting application your organization uses, regular and routine bank reconciliation will keep your records accurate for your reports and ultimately, keep your board, funders and donors happy.

Do you have any reconciliation tips to share?  Let me know in the comments.

Laura Reifschlager
Trainer
Sage Nonprofit