Time and time again we are presented with situations where businesses allow their books to slide. In the end, all that is left is a huge trust accounting nightmare. Top of this list is reconciliations. What can be a simple task can quickly turn into a massive job. One that will cost you a lot of unnecessary time and money.
So we have highlighted the top 10 common reconciliation errors we come across on a regular basis, and the simple steps you can take to turn your reconciliation nightmare into a well-oiled machine.
OUR TOP 10 RECONCILIATION MISTAKES
- Receipting funds into ledgers that do not appear on your bank statement.
- Not receipting funds into cashbook if a tenant file is not yet created. This in turn leads to the money being overlooked and not receipted toward that tenant at all.
- Receipting more funds into ledgers than what appears on bank statement. This can be as simple as entering $250 instead of $240 – but throws the whole system out.
- Writing cheques from your trust chequebook without entering them into the correct ledger folio.
- Double handling – receipting an entire day’s worth of transactions on the bank statement resulting in payment to owners twice at end of month.
- Presenting entries in the wrong month – ie: debits on the bank statement from May present in the June bank reconciliation. Keep your debits and entries in the same month!
- Processing withdrawals from the bank without entering them into the software and against the relevant owner’s ledger record.
- Paying management fees twice in the same month for the same day.
- Double payments – ie receipting $500 cash to the tenant ledger, depositing the funds at the bank yet then receipting them again to the same tenant when funds appeared as a credit on the bank statement instead of presenting the funds as cleared in the bank reconciliation. Owners will appear to be paid more than they physically receive.
- Receipting unknown funds to unidentified ledger. When you locate the correct tenant, a receipt is entered against the correct tenant record without reversing the original unidentified receipt. This leads to a surplus in the cashbook because funds were entered twice but only received once according to the bank.
Seemingly simple errors right? At least one of this list has happened to all of us at some point. Yet, they are super easy to fix and ensure your reconciliations go without a hitch.
OUR TOP 10 RECONCILIATION FIXES
- Conduct onsite staff training on receipting and reconciliation using your software so users can learn on the job.
- Reconcile daily. This will allow you to easily manage your errors instead of piling up and turning into a reconciliation monster with three heads.
- Create an agency Policy and Procedure document. This will cover cash handling, cheque writing, withdrawals and banking of funds. Ensure this is included in your staff orientation and at yearly staff reviews and training.
- Keep a clear receipt process that is clear to staff.
- Allocate dedicated staff to manage your trust accounts. Too many cooks in the kitchen can lead to unsavoury chaos. Limit the number of staff with access to the account. This allows for greater accountability and reliability.
- Define your staff roles so everyone is clear of their jobs – once again, see above point.
- As manager, take the time to cross check your staff’s work, especially the trust accounts. Staff autonomy is important, but it is also wise to keep your finger on the pulse. Especially when it comes to your trust account.
- Early intervention – deal with issues when they arise to prevent them from snowballing into bigger ones.
- If you are feeling out of your depth, engage the help of the professionals – they do this stuff on a daily basis and can take the stress right out of your hands.
- If you want to keep it in-house, recruit the right, qualified staff and don’t skimp on hiring unqualified personnel to fill senior roles and accountabilities.
So there you have it. Our top 10 reconciliation mistakes and top 10 fixes. Where there is a problem, there is an even better solution.