Below is a list of common reasons for out-of-balance bank reconciliations. Review the tips below the table for managing these issues. If you still have difficulty, consult with your Accounting team on your company's preferred practice for resolving these issues, or contact DDI Customer Care for assistance.
Note: To save a reconciliation with an out of balance variance, the Company Master setting 'Accept & Save Out of Balance Bank Reconciliation' on the Accounting tab must be enabled.
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Issue |
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Recent Conversions |
If your system was recently converted to Inform from another accounting system, the transactions produced in the old system will not display in the Bank Reconciliation screen. This will prevent an accurate reconciliation. In this case, a journal entry may be needed to balance your first bank reconciliation. Note: do not recreate cash disbursements or receipts in Inform from your old system. This would double count these transactions since the transactions are already part of the opening balance journal entry. |
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First-Time Reconciliations |
If you have been using Inform for an extended period of time but have not reconciled your bank statement in the past, you will have a significant number of old transactions to purge. Transactions from previous bank statements, along with transactions from the current bank statement, must be cleared. It may take multiple attempts to produce an in-balance reconciliation. |
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Using a Cash Bank Account as an Expense Account |
If you write checks from an expense account, the system creates equal and opposite transactions in the bank reconciliation. However, an additional credit entry, ex. a journal entry that transfers the money from one account to another, is needed to account for the check accurately. |
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Inconsistent Reporting Periods |
The General Ledger is driven by the accounting period; the bank reconciliation is driven by the date. If a transaction occurs outside of the current accounting period, your bank reconciliation may not tie to the General Ledger. Adjusting entries may be necessary. |
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Voiding A/P Checks from a Prior Period |
When you void an A/P check, it is removed from the system. All invoices that the check paid are reopened. If you issue a check in one accounting period but void it in another, your book balance may not tie to the General Ledger. An adjusting negative entry may be necessary. |
First steps
- Double-check each entry to make sure that nothing was missed. Print or export a temporary bank report and use it to verify that all checked items agree to an item on the bank statement.
- Narrow down the source of the difference. If your statement reports the total amount of checks cleared, this value can be compared to the total disbursements cleared in the system. If all bank disbursements were processed as CD’s within Inform and the values agree, the cause of the difference can be narrowed down deposits and credits. Total deposits can be compared to the total deposits in Inform. Journal entries may be difficult to compare since they can be a debit or a credit. These transactions may have to be reviewed individually.
- Verify that any cleared journal entries are made in the correct direction. For example, a bank fee is a deduction and requires a debit to Bank Fees and a credit to Bank Cash.
- For particularly tough differences, it may be helpful to export a bank reconciliation report to Excel and compare it to an exported bank statement (if feasible). To export an “in progress” bank reconciliation, right-click anywhere inside the active screen and choose Export to Excel.
For unresolved reconciliation differences
- Make a manual journal entry between the Cash account and a Balance Sheet suspense account. This will keep the Bank Ledger and General Ledger in balance with each other. By placing the amount in suspense, you are not recording an expense until necessary. Additionally, the accounting period can be changed to the month of the bank reconciliation.
Handling differences between book balance and General Ledger
After permanently saving a balanced reconciliation, check the report for any G/L variances between the book balance and related G/L period end balance.
Keep in mind that a completely reconciled bank report may yield a variance due to timing factors.
Also note that a negative book balance could result if there are outstanding disbursements that are deducted from the system but not the bank.
Causes of temporary timing differences
- Making journal entries with an accounting period and transaction date in different months. The DATE and PERIOD must fall in the same month. Bank reconciliation uses DATES and the G/L uses PERIODS for classification of data.
- Clearing transactions entered into a FUTURE accounting period. If a period 0718 journal entry is cleared on the 6/30/18 bank reconciliation, there will be a temporary (timing) difference between the book balance and G/L balance until the G/L catches up in July..
- Voided A/P Checks. If a prior month check void occurs before the bank recon is completed for the current month, there will be a G/L timing difference. For instance, if the check was issued in period 0618 and voided in period 0718, but the bank reconciliation has not been done for June, there will be the need to carry the check amount as a positive when comparing the reconciled book balance to the G/L. This is because the effect of the void won’t clear from the G/L until July.
- Voided A/R Cash Receipts. If a prior month receipt void occurs before the bank recon is done for the current month, there will be a G/L timing difference. For instance, if the deposit was received in period 0618 and voided in period 0718, but the bank reconciliation has not been done for June, there will be the need to carry the deposit amount as a negative when comparing the reconciled book balance to the G/L. This is because the effect of the void won’t clear out the G/L until July.
Causes of permanent differences
- Changing the Bank Ledger balance instead of using a journal entry. When this happens, an immediate discrepancy between the Bank Ledger and General Ledger is the result. In addition, the change in cash is not reflected in the accounting records because Bank Ledger changes do not generate accounting entries.
- Permanently saving a reconciliation when there is a difference. If the difference cannot be found, a journal entry should be made between Cash on Hand and Cash Differences to balance the system. If the difference is due to a partially cleared item (where a portion is on the 6/30 bank statement and the rest is on the 7/31 bank statement), make an accrual journal entry to balance both months.
Causes of incorrect book balance to display on report
- Accrual journal entries. The reversing portion of an accrual journal entry is assigned the same date as the original portion. The result is that the bank statement includes the reversing portion "too soon" as part of the Reconciled Book Balance calculation. If an accrual entry is used, the Reconciled Book Balance must be adjusted to exclude the reversing portion of the accrual.
- Postdated A/P checks. If a date in a future accounting period is assigned to a check and the item is outstanding on the current reconciliation, the report will fail to include it in its book balance calculation because the transaction date is after the bank statement date. The date assigned to a recon is the cutoff for inclusion of outstanding items. If this occurs, the negative effect of the postdated outstanding checks must be subtracted from the reconciled book balance.
- Outstanding items posted within the current bank recon period, but dated in a future month. These items will be reflected in the G/L balance but not the reconciled book balance and will need to be carried.
- Journal entries made to a period after that month's bank reconciliation has been permanently saved. When this occurs, the G/L balance changes without a corresponding change to the reconciled book balance on the bank report. This happens because the bank reconciliation report data is based on the outstanding items at the time the bank was reconciled. If a report is re-printed after additional entries are made, the G/L balance will update, but the detail of the report will remain static.
- Reconciliations for statements that do not cut off at the end of the month. When a statement is dated in the middle of the month, it may be reconciled like a month end statement. However, the comparison between G/L and book balance is based on the period ending G/L balance and will be skewed when comparing to a mid month book balance.