Has the Previous Bookkeeper Never Done a Bank Reconciliation?
Hi Everyone,
I may soon be taking over the Bookkeeping for a business and recently reviewed their books on QuickBooks Online (QBO). To my surprise, it seems no bank reconciliations have ever been done in their 8 years of operation.
Upon questioning the current bookkeeper, they couldn’t provide a clear answer, suggesting it’s likely that reconciliations have never been completed. Is there a Bookkeeping method that skips reconciling bank and credit card statements that I might be unfamiliar with?
With the fiscal year-end approaching, I’m contemplating whether to advise my prospective client to conclude their current month with their existing bookkeeper. Personally, I would prefer starting fresh in the new year and transitioning them back to QuickBooks Desktop, a system I am extremely comfortable with, despite my dislike for the QBO layout.
Thanks, everyone!
One response
Taking over from a bookkeeper who has not conducted bank reconciliations can be quite challenging, but it’s also an opportunity to help the business get on track with more accurate financial records. Here’s a detailed approach to handling this situation:
1. Understanding Bank Reconciliation
Bank reconciliation is the process of matching the balances in an entity’s Accounting records for a cash account to the corresponding information on a bank statement. Reconciling your bank and credit card accounts is fundamental because:
– It ensures that the cash records in your Accounting system are accurate.
– It identifies discrepancies like unrecorded transactions, errors, or fraud.
– It enhances cash flow management by confirming all inflows and outflows.
Without regular reconciliations, it’s difficult to ensure that the financial statements are reliable.
2. Assessing the Current Situation
Since no reconciliations have been done, you should:
– Conduct a historical review: See how transactions were recorded over the past 8 years. This will help you identify any glaring inaccuracies or patterns that need correction.
– Evaluate existing records: Identify any recurring issues such as uncleared checks or unrecorded deposits.
– Establish a baseline: Decide how many months (or years, if you have the capacity and it’s necessary) you’re going to reconcile retrospectively. Start with the current year for immediate impact.
3. Moving Forward with Reconciliations
Communicate with the Client: Make sure your client understands the importance of regular reconciliations and the potential issues arising from neglecting them.
Decision on Timing: Regarding whether to let the current bookkeeper finish the year, it really depends on time, complexity, and cost. If the previous bookkeeper is not reliable, it might be better to wrap up the transition swiftly. However, if possible, having the previous bookkeeper finish under strict guidance could save time.
Implement a Reconciliation System: Establish a routine for reconciliations (e.g., monthly) and ensure that your client is committed to following this process going forward.
4. Switching Software Preference
Benefits of QBO vs QB Desktop: While QuickBooks Online (QBO) offers cloud convenience and integrations, QuickBooks Desktop may offer you more speed and flexibility if that’s your preferred platform. Discuss the switch with your client, highlighting the benefits and any potential drawbacks.
Client Training: If transitioning to QB Desktop, ensure your