I work with a lot of small business owners and not-so-small business owners who use either Intuit QuickBooks or Sage Peachtree accounting software. I see QuickBooks more often but according to David Matthew, ERP Analyst and Software Advice Blogger, “with the recent release of Peachtree 2012, Sage has taken major strides in usability.” David does an excellent job in comparing the two in his recent post, complete with an Overview of Essential Features, a Cost Comparison, and screenshots of graphics.
Your bank can offer services that integrate with your accounting software for the sole purpose of creating efficiencies. For instance, you can download your paid checks from your bank’s online banking system and you will be able to import that data right into your bank reconciliation module of your accounting software. This will automatically populate your cleared checks and allow for quicker, more accurate statement reconciliation. Your bank can also provide Direct Deposit service to your employees by exporting a payroll file out of your payroll module and uploading it into your online banking service. A last example would be a scenario where the business owner would use a bank lockbox to collect payments. The bank can create a “posting file” to export and upload into your general ledger to close out an invoice. I don’t know to what extent QuickBooks or Peachtree can provide these aforelisted functions but you should consider many other aspects of your software package in selecting one that fits best for your company. I know you will find David’s blog entry helpful in that regard.
The reconciliation of banks accounts is vital to the success of your business. It can be intimidating for some, but with established procedures and today’s software and electronic features, it can be quite manageable.
The first step involves the matching of paid items from your bank’s information reporting system or bank statement to the data from your company’s books. The purpose here is the make sure that all transactions posted to the company’s bank accounts are accurate. Reconciliation should be a three-way process comparing the data on the bank statement with the data posted in the general ledger and the source document.
It is recommended that you look at the items posted to your bank account each day by signing into your online banking service and reviewing activity from the prior day. While a complete reconciliation is done daily by some, the most important thing is to actually know what the bank posted to your account last night. A full reconciliation should be done at least monthly, at a minimum.
If you have multiple accounts – corporate card,/travel and entertainment, payroll, credit card , reconcile those at the same time. Be prompt in examining your bank statements and quickly notify the bank of fraud or errors. Failure to do this in a timely manner may result in liability being transferred back to you because of a lack of due diligence in protecting your accounts. Within 30 days is reasonable and after 90 days is near where the bank will draw the line.
If you write a lot of checks, see if your bank reconciliation module within your software will permit you to import a list of paid checks from the bank. This is not difficult and it will keep you from having to manually check off your cleared items. It can save time and prevent errors. Practically all banks should allow you to export this “paid item list” from their system into a csv file for import.
Your bank can also fully reconcile your bank accounts each month (for a fee), but this requires you to be able to send the bank information of the checks you have written. If you write more than 500 checks each month, this is worth looking into. The time you save by letting the bank handle this task may be worth the cost.
Do you spend a lot of time reconciling your bank accounts? For some business owners it is easy but for others it is really time consuming. Some folks actually spend days reconciling bank accounts each month because they are balancing several different components (incoming/outgoing wires, credit card receipts, etc.) in addition to the checks that have been paid. Oftentimes a second person or a manager will spend a bit of time reviewing it as well.
Your banker can actually help you speed up this process. He should be able to direct you into your Online Banking module and show you how to download a CSV file for subsequent upload into your bank reconciliation software. At the very least, this will save you the time you are currently spending checking off your paid items. If you don’t write a lot of checks, this is not a big deal but if you are writing over 100 checks each month, this quick exercise can not only save you time, but it can help you avoid keying errors. With the integration of this file, you have the basis for your checking account reconciliation. Many banks don’t charge you anything extra to perform this function, but be careful as some do charge fees in the form of “downloaded items.”
A second but more complete and more complex option is working with the bank to provide you a full reconciliation of your account each month. In order to do this, you need to be sending the bank a transmission of your “check issue file” every time checks are written. You can send a file over to the bank daily or however often you do a check-run. They might even allow you to send one transmission at the end of the month for all of your issued checks. The bank is able to run your complete check issue file up against the actual items that paid on your account throughout the month. Usually by the end of the first week and at least by mid-month your bank should be able to provide you a fully reconciled account report.
Regardless of whether or not you use the bank to assist you with your reconciliation duties, be sure to complete this task each month as quickly as possible. Do not wait until the next cycle. Reconciling your accounts is the one sure way to determine if any fraud is present. If you find anything suspicious and you report it to your bank before the end of your next cycle, the bank is likely to work with you in resolving the issue. If you wait, you are risking that you will be held more liable for any potential losses.