DEPOSIT RECONCILIATION (AKA Bank Reconciliation)

Bank reconciliation (if prepared or reviewed by someone other than the person with access to the checking account) is a form of internal control over a company's checking account balance. Basically, the bank reconciliation compares the amounts in a company's accounting records with the amounts in its bank's records. Any differences are reconciled (explained) so that improper amounts will be exposed and the company's records and financial statements will report the correct balance for the company's checking account.

At a minimum, the bank reconciliation should be done within a few days after the end of each month. However, with the bank's electronic records readily accessible, bank reconciliation should be done more frequently.

 

 

Some reasons for preparing a bank reconciliation as soon as possible include the following:

• If there is an error or omission in the company's records that affected the balance in the checking account, the company might issue checks when the bank's records properly indicate there are not sufficient funds in the checking account.
• If there is an error in the company's cash records, there will be a related error in another account because of the double-entry system of accounting.
• If a dishonest person is embezzling money through a checking account, the sooner it is discovered the smaller the loss will be. This is the reason for having an independent person prepare the bank reconciliation.

Since electronic deposits and electronic withdrawals (charges) are so common, it is important that the bank reconciliation be prepared and reviewed more frequently than once a month.

 

What are the key issues?

 

 

 

What's involved? (these are the standard Accounting Processes)

 

1. Get bank records

You need a list of transactions from the bank. You could get that from a statement, from online banking, or by having the bank send data straight to your accounting software. If you run a current account and a credit card account, you’ll need both statements.

2. Get business records

Open your ledger of income and outgoings. This might be in a logbook, on a spreadsheet, or in an accounting software package. Some accounting software will pull in bills and receipts with the help of data capture tools and extract the data automatically.

3. Find your starting point

Find the last time the balance on your business books was the same as the balance in your bank account. Start the reconciliation from there.

4. Run through bank deposits

Make sure each deposit appears as income in your accounts. If something is missing, enter it. You’ll need to figure out if it was a sale, interest, a refund, or something else.

5. Check the income on your books

Each entry should match a deposit on your bank statement. If something is missing, find out why. A customer payment might have bounced, for example.

6. Run through bank withdrawals

All bank withdrawals should be recorded in your books. This includes things like bank fees, which you might not have accounted for yet.

7. Check the expenses on your books

Each entry should match a withdrawal from your bank statement. If not, find out why. One of your payments may not have cleared yet, or maybe you paid using cash or a different account.

8. End balance

After you’ve checked all the deposits and withdrawals, your business bank balance should match the totals in your business accounts. This will be the starting point for your next reconciliation.

 

Sage Intacct Bank Reconciliation

Invoices and Sales orders in Sage Intacct have Payments connected to them.  Payments have the status of [undeposited] or [deposited].  To get the payment to change status requires bank reconciliation to be completed.

A payment will move from [undeposited] to [deposited] only when a Deposit record is created in Netsuite.  A deposit record contains a list of all the payments inside of a deposit. 

Normal Sage Intacct (without Paystand)

If they don't have Paystand, the customer will need to manually create the Deposit record, which would result in payments changing to [Deposited] status.  The customer would use the "Make Deposit" function in Netsuite and select, "Create Deposit" and then manually select all of the payments that appeared in that deposit.  This is a manual, time consuming task.

Netsuite + Paystand

Paystand's software will automatically create a deposit record in Netsuite.  Since Paystand is connected to the bank, we know when the deposit will post.  When it posts in the bank, we then create the deposit record in Netsuite, which changes the status of payments to [deposited].  As deposits can be very large, with many payments included, Paystand's automation creating this record can save clients tons of time.

 

Deposit Record, created by Paystand Screenshot

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