One definition of a reconciliation is the comparison of two numbers to demonstrate the basis for the difference between them. From this definition, it can be assumed that the two balances will seldom match. Therefore the question is - Where should you start when they don't?
- Determine the difference between the two reports. Do both reports:
- Include only posted or both posted and unposted transactions?
- Include or exclude voided or deleted transactions?
- Include the same sources of information? (For example, one report might include only vendor invoices, and the other might include both invoices and journal entries.
- Include the same date range?
- Include the same type of date range? (For example, one report might include post date and the other might include the transaction date. If the dates differ on any single transaction, the reports will differ.)
- Search for the differences between two reports or balances:
- Start at the beginning. Make sure your beginning balance is the same as your prior ending balance. Transactions posted to a prior period will change the beginning balance unless you close prior periods to prevent this from happening.
- Search for example transactions that fit one of the criteria you identified. You might do this through query or by running a report such as the General Ledger report to determine if the transaction is posted or if it has a specific source code.
- If you cannot identify a difference between the two reports, look for a transaction that occurs on one, but not the other. One method for locating transactions is to create output queries for both reports and merge them using the XOR operator in Accounting for Nonprofits or mark the option Select all records included in Query 1 or Query 2, but not both in The Financial Edge (BB137084). Review the merged query to find items that exist only on one report or the other.
- Correct problems, if any are found:
- Deleting, voiding, or making a journal entry to correct a problem may not be the correct response. Determine if the reconciling item is a permanent difference or a timing difference. For example:
- Outstanding checks from the bank register. The checks will be deducted from each bank's balance as soon as they cleared (normally the following period). This reconciling item resolves itself over the course of time. However, an input error, such as an incorrect transaction date or posting date is not considered a timing difference, even though it will eventually reverse itself.
- An example of a permanent difference would be a service charge made by the bank. Until the service charge is recorded in your bank register, it will never match the bank's balance.
- Document the timing differences. Verify that in the next monthly reconciliation the documented timing differences did indeed resolve themselves. If they did not, determine their current status and take corrective action if needed. For example, a check listed outstanding is now confirmed destroyed. The check has now become a permanent difference instead of a timing difference, and must be corrected by voiding the check.
- Take steps to correct permanent differences by making the appropriate adjustments.
- Prevent reconciling items from occurring. While you cannot always prevent timing issues, you may be able to locate and record permanent items in advance, and to prevent errors and other issues by using source codes, transaction dates, and post dates consistently. Add the method for correcting reconciling items to your policies and procedures manual.
Note: Support for Accounting for Nonprofits 6 ended December 31, 2007. Support for Student Billing 6 and Payroll 6 with The Financial Edge ended September 30, 2008. The Financial Edge, version 7 of our accounting software, is a benefit of your Blackbaud maintenance plan. We offer several customizable options to help you convert to The Financial Edge. Please contact your account manager.
For more information on how to set up or run specific reports used in reconciliation open the appropriate Reports User Guide.