New Budget, New Coding Regime

What are the things to look out for when coding off account transactions in the new financial year?
This is a small but important part of the finance system in your school that can be easy to miss.

What do I mean by coding?
We are talking about the use of your general ledger (GL) codes, the chart of accounts that form the basis of all your financial reports.

Whether it is a bank reconciliation, sales invoice or purchase invoice, your coding regime needs to consider the new financial year’s budget, for allocation and rationale.

Note: For the purposes of this article, we are assuming that the 2022 Jan to Dec budget has been approved by the BoT and has been entered into your system ready to go.

Often data entry staff have not necessarily been involved with the budget setting process, which may have happened months prior.

If they continue to code account transactions off as they always have, there may be the need to have a tidy up down the track. The ideal is that staff receive guidance at the start of the year to code according to the new budget.

Here are the key questions to review:

  1. Has anyone ensured that any new GL codes have been entered into the accounting system? Who is responsible for passing this information on to whom?
  2. Do the data entry staff know the new codes exist and what gets allocated there this year?

Note: Key people responsible for reporting will need to know about any codes that did not exist last year, so they can build them into the reports and ensure they fall into the right categories. This is usually part of entering the new budget.

  1. Have key staff been advised to cease using some existing codes as they no longer have a budget for this year?

In this case we suggest you edit the name to have the words ‘DO NOT USE’ in front of them so staff know not to keep using these codes.

Note: Because the year-end process is still underway, it will be important not to archive these codes as they will be needed for running year end reports, and may be needed for further year end journals and last-minute audit adjustments.

Tip: Once the year end accounts for the prior financial year has been finalised, then the codes no longer in use can be archived so they are not creating confusion for the rest of the year. This is hard to remember so we suggest you calendar this as a reminder.

At School Accounts Ltd when you use our financial services your account manager becomes part of the fabric of your accounts team. To us, managing the chart of accounts, budget entering and coding rationale is part of our psyche and comes naturally. One more peace of mind item for your team.

Give Nicola if you would like to discuss further or find out more: 021 116 4747

Common Bank Reconciliation Errors

One of the most basic things in finance is reconciling the bank each month. This sounds like a no-brainer, but you would be surprised how often we find this is being missed as a regular process. The result being some very interesting accounts.

I will share a few examples from our School Accounts Ltd files. (Unlike the Teaching profession, we really do need to get some better work stories, I know!)

First here are some common scenarios we come across in general:

  1. The bank reconciliation has never been carried out regularly. It is not part of the standard procedures.
  2. The bank reconciliation report is being run monthly, but the actual bank balance is not verified against the software.
  3. The bank reconciliation report is being run monthly, but it doesn’t balance and has been this way for a while.
  4. The bank account balance in the accounting software reads the same as the bank balance, but there is this other figure showing as a difference. It has always been there.
  5. The bank account is out of balance, but it is out every month by a different amount and staff have no idea why.
  6. There are always transactions showing in the bank rec because income and expenditure is being dated back to the month that the bill or banking related to, as a form of accrual accounting. (Overall if the bank balance equals the actual bank, this is fine).
  7. Credit card bank reconciliations are not being completed because staff are still chasing up receipts from the card holders. Reports are run despite these being incomplete.
  8. Payment options like Pay pal or Stripe or Go cardless are not being reconciled against the portal reports/balances.
  9. The school fees software is not being reconciled against the takings in the bank each week.

There are several different reasons for the above scenarios, and this is what we love to look out for and provide guidance on. For example, in the case of credit cards, we need to emphasise these are real bank accounts and do matter! But let’s focus on imbalances for now.

Here are some common things to look for when your bank rec is out of balance:

  • Post dated items. The classic is in January when dating December items to the current year when you meant last year. So, until December 2022 you are going to have weird stuff happen unless you find it!
  • Bank transfers being coded off instead of treated as a transfer between bank accounts.
  • Bank transfers being duplicated (transferred both ends so one reconciles but there is a second transaction sitting unreconciled)
  • Not realising that your many attempts at reconciling a tricky banking breakdown resulted in more than one ‘receive money’ being created, and the unused ones are still sitting unreconciled.
  • Coding an income item off when there was a sales invoice in the system that needed to be matched against it.
  • Coding an expense item off when there was a bill invoice in the system that needed to be matched against it.

TIP: The above happens when the amount paid is slightly different to the invoice, so it doesn’t match automatically. These need to be part allocated OR the difference treated as an overpayment depending on whether it was over or under the correct amount.

Long term imbalances: 2 most common solutions

  • The conversion balance for that bank account was entered incorrectly.
  • There are missing bank transactions in the accounting software. When you have live bank feed set up this can be due to a bank connection one off error somewhere along the way, or due to missing data in the import process early in the software set up.

The Good News

There are two ways to mitigate ongoing bank reconciliation errors; training and external review.

Training the staff responsible for coding off your bank accounts is a worthy investment considering the time it saves those who need to fix it later, at extra expense!

External review by finance providers who are experts in the software as well as the very specific school accounting requirements, will bring a smile to your auditors and peace of mind for your management team.

All these things can be discovered and corrected with a robust review process in your accounts.

This is something that we love to do at School Accounts Ltd – train your staff, and review the accounts on a regular basis.

Contact us today to get help with coding your accounts the right way!

Back up you team

Your School Accounts Team Support

These are trying times for school accounts staff, and there is no better time to have a team to back you up.

A team brings different skill sets, bents and strengths. If you have someone who works alone a lot of the time, have a think about the support and backing you or your accounts staff have.

We are really chuffed to be growing our team here at School Accounts Limited and very pleased to introduce Judy to our Auckland based personnel. Judy is an experienced accountant who has worked in and with schools nearly her whole career, from Kindergartens to Colleges over 25 years. She is a talented communicator with a thorough understanding of what the management team needs, which adds up to being extremely valuable on any school accounts team. Imagine someone like that backing your team and reviewing your accounts?

Our other team members include Lekhni, who is well on her way to being CPA qualified and currently the queen of turning year end annual reports around in record time. Colin, a past CA and forensic auditor, who specialises in balance sheet issues and budget assistance. Nicola who is the Xero reporting expert and delights in training school staff in efficiencies. Soon to be joined by Leanne who is currently temping in a college as the business manager. Between us we have over 56 years’ experience specialising in Schools.

Who do you know that could benefit with support in year end accounts, monthly management reporting, weekly accounting in Xero, or a one-off project?
Here is a link to a flyer with more about our services.
Or call Nicola now on 021 116 4747.