Understanding General Ledger Reconciliations
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This is a short introduction to Credit Union general ledger reconciliations for new accounting staff. The presenter will need to print the slides in notes view to see the comentary. Bullet points minimal.
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Understanding General Ledger Reconciliations
- 1. Understanding General Ledger Reconciliations
- 2. Why Do We Reconcile GLs?
- 5. Can Prevent Losses to the Credit Union!
- 6. Write-Offs VISA Disputes ATM Cash ACH Exceptions Stale Dated Transactions Total 0 10000 20000 30000 40000 50000 60000 70000
- 8. Back Office or Operations Department Accounting Department
- 11. Happy Auditors
- 12. Personal Pride
- 13. Questions?
- 15. SAMPLE CREDIT UNION ACCOUNTING SUSPENSE 870008 October 31, 2006 Stale Date Days Debit Credit Clear 11/30/2005 ADP Payroll pending refund 335 100.00 11/20/2006 7/24/2006 Staff Ded R. Rabbit 9.75 S/B 9.74 99 0.01 11/20/2006 7/31/2006 Investment Income Clearing 92 1,575.81 11/20/2006 8/24/2006 Expense Reimbursement Staff M.Mouse 68 1,246.38 11/20/2006 8/24/2006 Expense Reimbursement Staff M.Mouse 68 137.81 11/20/2006 8/28/2006 #12345 Disp Members CU/GNL/RBL 64 460.00 11/20/2006 8/31/2006 INV CLR Aug 2006 61 2,795.35 11/20/2006 8/31/2006 INV CLR Aug 2006 61 2,652.17 11/20/2006 8/31/2006 Reverse ADP Benefits 61 550.00 11/20/2006 9/1/2006 #23456-00 C. Robin (offset missing) 60 20.00 9/5/2006 #34567 (offset missing) 56 10.00
Editor's Notes
- This is a Q & A slide. This is creates a baseline of participant knowledge so the presenter will know what to emphasize. Ask staff this question and write their responses on the flip chart. You don’t need to respond in detail here, just acknowledge their responses with a “thank you”.
- The most important purpose of recons is to insure accuracy of transactions posted to member’s accounts (customers). When we have un-reconciled items in our GLs it could mean that a transaction was posted incorrectly to a member’s account. Reconciling these GLs in a timely manner allows us to catch these errors before they become a problem for the member. When clearing accounts are reconciled daily then the errors can be corrected before statements are sent out to the members. This is the way that back-office staff can support and contribute to good member service.
- This is what a member (customer) looks like when errors are not corrected quickly. Imagine if we post corrections to a member’s account six months or a year after the error occurred. How would you like to be on the other end of this phone call? Branch staff, Operations & the call center staff would surely appreciate knowing about errors quickly in order to minimize the number of irate members that they have to deal with.
- The second purpose of GL recons is to minimize losses to the credit union. Through timely recons we can find errors and correct them before they become losses. Many of the processes that we reconcile have deadlines for returns or claims. For example, ACH returns from today‘s rejects must be sent either today or tomorrow at the latest. If these rejects are not returned the credit union takes the loss. That is the reason that the ACH clearing and exception accounts must be reconciled daily. If an unprocessed exception is found today in yesterday’s work Operations or Back Office staff must be notified today in order to prevent the loss. Tomorrow will be too late. VISA charge-backs have a longer time frame, but there are still deadlines on these. Missing the deadlines may cause us to forfeit chargeback rights. If we miss the chargeback deadline CUNA (our insurance company) may decline the claim creating a loss to the credit union.
- Here is a graph showing potential losses due to cumulative problems with recons. Losses like these can be prevented if GL recons are performed in a timely manner to prevent exceptions from becoming stale-dated. Performing recons timely and diligently clearing exceptions will help prevent future losses. This has an impact on the Net Income and ROA at your credit union. It could have a direct impact on bonuses for you and your co-workers.
- Sometimes interaction with other operational departments looks more like a snowball fight than real cooperation. Reconciling GLs is the best service that we can provide to other departments in the Credit Union. Your co-workers may not like having their errors pointed out and conflicts may arise. The best approach is not to pin blame on anyone, but to find the way to work together and correct the errors in a way that provides the best possible service to the members.
- This picture is more like what we need to see in the way of interdepartmental cooperation.
- This is the “textbook” reason for reconciling and auditing GLs.
- Up-to-date reconciliations with minimal stale dated items go a long way toward getting a good audit report from CPAs and examiners. A clean audit also makes your manager and the executive team happy.
- Knowing that we have a clean general ledger and our reports are accurate should give us a sense of personal pride and accomplishment.
- Q&A. Time to confirm that basic points have been retained.
- This is a list of required elements according to the reconciliation procedure
- Note the heading, list of outstanding items, Stale days is a formula subtracting the heading date from the posting date. The highlighted items are stale because they are over 30 days in a clearing GL and are not cleared at the time this recon was done.
- The difference is a formula that compares the recon balance to the GL balance. As you work the recon you can check your difference. This may help you locate outages and transpositions errors.
- I also recommend adding the date and time as well as path and filename to the footer of the excel sheet. This time stamps the recon (since one department measurement of success may be recons done on time). It also prints the file name and location on the face sheet so that others can locate the file if they need to.
- People think that accounting is boring or tedious. Sometimes it is. But tracking down staled dated items in GLs can be a lot like detective work. You need persistence, ingenuity and tenacity to locate and resolve outstanding items. It can be very satisfying and even exciting to be on the trail of the lost debits of the Baskervilles. It is our job to see the case through to its final conclusion. Another department may have made the mistake that put the item in our GL, and they may make the final entry that clears it, but it is our job to see it though to the end.
- Understanding and locating transposition errors.
- It helps to know your times tables, especially the 9’s to be able to spot transposition errors quickly.
- If the difference between two numbers is nine, try this: Nine divided by nine = one. This tells you the spread between the numbers that are transposed. See examples. Knowing this trick will help you to quickly and easily locate many transposition errors that may confound others for hours! You can quickly run down a column of figures, knowing you are looking for a narrow spread, and quickly isolate the very few transactions that need to be looked at.