Hello Bloggers
For some reason or another, this post did not show on Wednesday, my apologies. Here it is again.
G. BANK RECONCILIATIONS
Again, I would like to re-iterate, if you are not a bookkeeper or accountant yourself, it is preferable that you use the services of someone who knows what they are doing. That is not to say that you need to give them control of your business – it is to say that they can do your books in a logical manner, which will also allow you the time to concentrate on your business. Leave the expert stuff to experts and you get on with whatever it is that you do best. It is like I always say to my hairdresser – I won’t tell her how to cut my hair if she doesn’t tell me how to audit her business – makes complete sense doesn’t it?
Having said all of that, there are certain bank reconciliations that are required in order to run a business effectively and some of them are also legal requirements. In this section I am going to make you aware of them, so that you have an idea, at least, of what should be happening, (even those of you who use the services of a bookkeeper/accountant) if you are doing your own books.
Bank reconciliations need to be properly carried out on a regular basis – at the very least once a month, but they obviously can be done as frequently as on a daily basis. Most of the big corporate businesses actually do their reconciliations on a daily basis as they move money from one account to another, usually to either decrease their overdraft facilities and/or to place funds in their investment accounts.
1. Bank recons (reconciliations) should be prepared on a monthly basis, on all the accounts. This function should be done by the bookkeeper/accountant (or yourself if you are doing your own books) or in the case of larger firms, but it should be someone who is independent of processing cash receipts or doing the payment function. In this way, fraud is kept to a minimum.
2. Bank statements must be received, unopened, directly from the bank. If your bank statement has been opened, it is a good idea to advise your branch and your post office branch as well. Remember this is confidential information and no-one should have access to it. If you are concerned about the security aspect of your banking information, make arrangements with your bank for you to collect the statements directly from them. Your bank statements are required in order to perform the reconciliation and must be kept secure until the recon has been completed. Your paid cheques should also be kept secure – remember, in some instances they may be required to be presented as “proof of payment” (POP).
3. Your bank reconciliations should include the following:
a. A comparison of paid cheques, with the cash book - this is to ensure that the names of the cheques, dates and amounts have been correctly posted in the cash book.
b. The numerical sequence of the paid cheques should be checked – this will evidence any cheques that have not been presented for payment and at this point, this should be followed up with the cheque recipient as the cheque may need to be stopped and a new one issued (if the cheque has gone missing in the post). The cheque should not take longer than 2 weeks to be presented for payment. Cheques that are outstanding and have not been presented for payment will need to be taken into account and current balance on the account will need to be adjusted to reflect the true value of the account. This can be controlled by means of a bar sheet (see Annexure 44 – Bar Sheet Control).
c. The deposit book also needs to be checked at this time to ensure that all cheques/cash have been deposited into the bank – if you are not performing this function yourself, it is a good idea to check that each deposit has the teller’s date stamp with the date of the deposit on it to evidence that the money did in fact go into the bank. These deposits should also be checked against the bank statement. The date on the statement should agree with the date of the bank teller’s bank stamp – if it doesn’t, there is a problem at the bank and this should be reported immediately to the bank manager! Remember, your account earns interest on a daily basis, so you could be losing interest and it also may be that the teller has used your money for his/her own agenda or it could be something as simple as they have put the wrong date on the stamp – either way, it needs to be investigated as it is outside of the “norm” and against banking laid down policies and procedures.
d. A review of the interbank transfers should be done on a monthly basis and the different bank account statements compared, to ensure that the transfers were done correctly and with the correct priorities.
e. Deposit slips should be tested and compared, to details with receipts and the receipts cash book. In the instances where deposits have been made electronically, these will form part of the banking reconciliation , but in the instances of physical deposits of cash and/or cheques, these need to be compared to the cash book to evidence that the funds have been receipted therein and that they have then been allocated correctly.
4. In the instances where you don’t have a bookkeeper and/or Accountant, but you have staff doing your books, it is important for the bank reconciliations reviews, to be checked and approved by a responsible independent employee on completion of the review. This will be a preventative against fraud taking place. This check should be evidenced by means of a signature and a date so that you can ensure that it has in fact been done – it would be a good idea for this to be included on your monthly checklist.
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