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VLog - Bank Statements and Reconciliations

Corina Hardaker

13 May 2024

Bank Statements and Reconciliations

Good morning. I would just like to share a few details regarding bank reconciliations. I'm seeing on several occasions that people are confused about the requirements, especially between bus agent, bookkeeper versus accountant. There's a bit of a mixed perception as to what is required. So technically the best practice is to pass your bank statement to the bookkeeper or accountant at the end of every month.

They then reconcile the balance in your software, whether it's Xero or MYOB, at the end of the month, to the balance on your bank statement. If your bank statement's saying that you have 1, 000 in the account, then your software should say 1, 000. What we're looking for is that it's true and fair and, transparent.

If the balance is not 1, 000, it's effectively saying that there is a problem. So that's where we then investigate whether there is a duplicate. You may have entered a invoice in or a bill in twice. You might have entered it as a bill, and then in when the bank feeds came in, you might have, entered it as a spend money.

So effectively the bill could be closed to the bank account. The spend money could then be allocated again. So then it's there twice, meaning your balance will be over. Also, there could be bank feeds that just happen to not have come in or a duplicate bank feed. It could also be that someone whether it's the owner of the file or an employee of the file has gone in and imported, bank statements or bank transaction lines into your software account.

So that looks like, Maybe you've started a new credit card. Sometimes when you start that balance, you are asked whether you would like to import from a certain date, like start your transactions to import to the software on a certain date. Sometimes you may have to start at that date. It might take two weeks, but it might start on the day that you applied for your bank feeds.

to connect with your software, which means you may need to import the difference from the beginning of whenever that account started. So that account, effectively, you might need to bring in 10 days worth of transactions or a month or whatever. Sometimes that could cause a duplicate because you may bring in more and it might double over from when the file actually started if you're not sure where to look, to see what's imported versus, the automatic feeds coming in from your bank. So, again, that is another reason why. Also, there may be things that actually aren't reconciled. So it might say they're saying unreconciled. It, you need to push that through. So, basically, it's saying you need to enter a sale and allocate the payment to the sale that's been received, or you may need to enter the bill.

So, And then apply the payment to the bill. So it also can show overpayments and underpayments. So you are very clear of what your income actually is. And if there's an overpayment, you can enter that part as a received money and then show it waiting as a credit balance, or apply the whole to the actual invoice and show it as a credit and then, you know, that's clearly money as accounts receivable, waiting to be refunded to the client. So you basically want to make sure that the balance matches because when you go to process the BAS or the bookkeeper, the accountant goes to process the BAS, your, You're clearly aware of what your true expenses and income are, especially if there is duplicates in there because you don't want to be paying extra tax twice on several items if you've only actually paid for it once.

That's why it's quite important to show the correct balance. The other important part of this too is, you can clearly show or prove that at every point. Every like at the end of every month that that account actually reconciled to your bank statement at the time, because sometimes the bank, the software gets unlocked and people accidentally put data in at the wrong date.

So they might actually be entering a bill today, but instead of saying that it was paid today's date, they might accidentally, if they're not paying attention and distracted, they might accidentally close, put the payment date as. Well, the 13th of May 2023, which If you're on a cash basis, the payment will then be shown back last year and not now.

Your BAS, when you go to lodge it, the beginning balance or the balance from previously lodged will have changed, and it won't be accounted for now. You might actually close that bill down in the future. You might actually accidentally put, 13th of September, 2024.

You could put the next year, 2025. It could be future dated, which means that account won't reconcile. And what happens is that it shows there is unreconciled, you would like. You're clearly looking for, for two clear lines, the software balance and your imported or your bank feed balance should be identical and it should be nil difference.

If you see the screen and it says that there is unreconciled, it's showing that there's, it doesn't balance. So therefore your data is not correct and your, not reporting true figures to the ATO. So sometimes you hear of accountants saying, we don't need to see your bank statements. We just push through what the transactions are in your bank feeds.

Now that's not really the best practice. I don't agree with it. I can see where they're coming from, but basically what they're saying is you are signing an agreement. You're giving them the authority to lodge their BAS based on the fact that you as the director or the owner of the business are being true and fair, are being transparent, have supplied all your invoices and, entered all the sales in and that you have provided bank statements, and that your accounts are reconciled.

Yes, you can look at the accountants or your bookkeepers, but usually I find it's the accountants who, if they're saying we don't need to see it then when you move on to another bookkeeper and they're like, where's our statements? We'd like to have the statements and you're pushing back saying, well, the previous accountant or bookkeeper didn't ask for them.

They just worked on whatever the figures were in the feeds. It's not the correct practice and it, it, needs to be addressed moving forward because at the end of the day, it's actually you as the owner or director of the business. It's your responsibility and you need to be read the documents that you're signing Because the ATO are going to say, but you've signed this authorizing that person to lodge your BAS Stating that you are being true and fair and correct and that you have done the correct process so it's actually your responsibility and that's how they push back and so that's why I'm trying to address that you need to step up and, and recognize where your responsibility lies as opposed to, as opposed to pointing to your agent or your accountant and saying it's their responsibility.

Cause yes, it, it is their responsibility as well, but at the end of the day, the buck stops with you.

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