more-arw search

Q&A Forum

Is there an acceptable variance amount when completing the bank reconciliation?

Frances Lennix's Profile

I am the treasurer for a fraternal organization. We currently have approximately 3000 members. My primary responsibility is depositing dues & fees, fundraising revenues and other contributions and issuing checks properly vouchered with receipts/invoices.

For the last few months, I have completed the bank reconciliation and after comparing to the ledger balance, I am $12.38 out of balance. There is no $12.38 transaction. There was no $12.38 transaction in the previous three months. Yet, I have been out of balance for four months now. Help!

Answers

Len Green
Title: Performance Improvement Consultant and E..
Company: Haygarth Consulting LLC
LinkedIn Profile
(Performance Improvement Consultant and ERP Strategist, Haygarth Consulting LLC) |

Frances
How accurate was the bank reconciliation that you inherited from the previous person. Could the $12.38 error exist there?

Randy Moore
Title: CFO
Company: SJB Bagel Makers
(CFO, SJB Bagel Makers) |

Are all bank charges recorded?
Is there a $6.19 transaction recorded backwards?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

If the same amount has been outstanding for several months, and you done a good faith effort to find the issue and the amount isn't material then think about just writing it off as bank fees.... however...

If you don't have all three "and's" coming back "true", go back and look again.

Janine Howe
Title: Controller
Company: In Transition
(Controller, In Transition) |

A long time ago, a mentor told me, all variances can be material. It could be a combination of two or more material unrecorded transactions offsetting to an immaterial amount. It is a small risk but could be true. Have you proven out your receipts per month or your disbursement per month since the variance? Have you had a second person review your cleared items? Did you carry over the correct beginning balance? Good luck.

Mike Haile
Title: Founder
Company: Haile Consulting Solutions
(Founder, Haile Consulting Solutions) |

Back to your question, I would say that there is no acceptable variance when it comes to bank recs. The reason that I say this is that transactions are typically downloadable from the bank and that there is lot of bank reconciliation software on the market. Assuming that the recs are done at least on a monthly basis then you should go back to see which month the difference started to show and then try and find it.

If it goes back a long time (>1 year) then I suggest you follow Wayne's advice

Anonymous
(CFO) |

From an accountants point of view; there is no irreconcilable difference. It needs to be found. From a treasurers point of view you could as means of expediency write it off and go forward. However, I would first go back to the first reconciliation that the difference appeared (If you cannot find this then you need some accounting help) and reconcile the statement again. If you cannon find the difference then reconcile separately each item in the reconciliation from the good month to the next month. That is for instance, take the OS checks from the good reconciliation and add the checks issued per books subtract out the checks cleared per bank and see if that agrees with the next months OS check list. Do the same for deposits and other reconciling items,

Anonymous
(Controller) |

Step 1 is to return to the month you were first out of balance. You don't have four months to work through, you have one.

The most common place to look for the cause of out of balance situations is a transaction in the amount of the variance, but sometimes a transposition error (does the variance divide equally by 9?) or a DR v CR error (does the variance divide equally by 2?) is the culprit, and sometimes more than one item causes the variance. Bottom line (see what I did there?), there is something on the bank side that was not recorded on the books, there is something on the books that was not recorded on the bank, or one or more of the transactions on either side were entered incorrectly. Confirm that your beginning balance for the month is correct, confirm that your period cut-offs are the same, and get out your fine-toothed comb. I agree with others that the amount is not necessarily immaterial, despite its relative smallness. Depending on the number of transactions you are looking through, you should be able to tick off every item between your bank statement and your cash report in a few hours. You might even do well to get some help, because sometimes a fresh set of eyes works wonders. It will be well worth it when you find the culprit.

Good luck!

Christian Van Lare
Title: Accountant
Company: Sivantos, Inc.
(Accountant, Sivantos, Inc.) |

Please go back to the month the difference appeared. I think the difference may come from a transaction that was booked differently from what hit the bank. Sometimes the actual transaction amount may not hit the bank for various reasons-bank fees deducted, customer short-pay etc. There could also be a shortage arising from your cash applications side. And then, there could also be non-transaction entries and adjustments on Book or Bank. Hope this helps!

Dan English
Title: VP of Finance
Company: Mud Pie LLC
(VP of Finance, Mud Pie LLC) |

Agree with the others. Bank recs are black and white.
1) Did items recorded in the books clear for a different amount on the statement?
2) Are items in the g/l not reported on the statement?
3) Are items on the statement not recorded in the g/l?
4) Did items on the statement not get recorded in the g/l for the right amount?

Those are the 4 buckets outside of incorrectly knowing how to prepare a rec.

1774 views

Get Free Membership

By signing up, you will receive emails from Proformative regarding Proformative programs, events, community news and activity. You can withdraw your consent at any time. Contact Us.

Business Exchange

Browse the Business Exchange to find information, resources and peer reviews to help you select the right solution for your business.

Learn more

Contribute to Community

If you’re interested in learning more about contributing to your Proformative community, we have many ways for you to get involved. Please email content@proformative.com to learn more about becoming a speaker or contributing to the blogs/Q&A Forum.