Bank reconciliations are one of the monthly tasks that any accountants have to do. I find it funny that bank reconciliations are necessary, but accounting students never get a chance to learn about it in school, at least in my case. During my undergraduate studies in Vietnam, because my major was business administration, I only took two accounting classes: Principles of Accounting and Managerial Accounting. In those two classes, I learned about a variety of fundamental accounting concepts such as general ledger, journal entries, chart of accounts, etc. However, the bank reconciliation concept was not one of them. The same thing happened in the course of my master’s studies at Cal State Fullerton. I acquired a lot of knowledge about subjects like differences between U.S. GAAP and IFRS, profit centers, cost accounting, transfer pricing, etc. But there was nothing about bank reconciliations. The lack of practical knowledge that I attained from my education was the reason why I was a bit struggled in my first accounting job. I did not know how to perform bank reconciliations properly.
Nonetheless, after a while, I got used to the reconciliation process and became more comfortable when doing it. Even though it is much easier for me to reconcile bank accounts, I still encounter some difficulties from time to time. I will share some of the challenges that I have faced in this post. I think it would be useful for people who want to pursue a career in accounting or want to know what it is like to be an accountant.
Large Volumes of Cash-Related Transactions
For any business, many daily transactions affect cash. Some typical examples are paying vendors, selling goods to customers, borrowing money from banks, etc. The bigger a business is, the bigger the daily transaction volumes are, and the harder it is to carry out bank reconciliations. In my first job, on average, there were thousands of cash-related transactions every month. Nevertheless, the accounting department reconciled bank accounts only once a month at month-ends. I was responsible for doing bank reconciliations for several months. It took me several days to reconcile one bank account every month. And there were seven bank accounts in total. During the time I was handling the bank reconciliation tasks, Deloitte was auditing the company. The auditors pointed out that my company should perform account reconciliations weekly, considering a large number of daily transactions for better internal control.
Cooperation with Other Departments
Even though accountants are ultimately responsible for doing bank reconciliations, the reconciliation process is still a team effort. The main job of accountants is to identify the reasons for any discrepancies between bank balance and book balance. After pinpointing the causes, accountants need to work with departments from which the problems were originated. The difficulty here is that for other departments, they have their own schedules and tasks. Besides, they may not understand the bank reconciliation process that well. If they are busy, they may not be willing to cooperate with accountants to solve reconciling problems. For instance, in my third accounting position, I was in charge of doing bank reconciliations for around thirty apartment communities that were assigned to me. The on-site managers of those properties were responsible for posting residents’ rent payments. However, there were occasions when the managers posted cash in the wrong amounts, in the wrong periods, or they did not post the payments at all. As a result, after figuring out the problems, I contacted the on-site managers and asked them to fix the issues on their end. For some managers, I had to explain the situations multiple times for them to understand. Furthermore, the managers did not always fix the problems right away. I often had to wait for weeks and send several reminders to have the issues corrected.
Good Computer Skills
Accountants can do bank reconciliations either in Excel or in their company’s accounting software programs. Performing reconciliations in Excel is usually the case. In my experience, I used Excel most of the time. I used Yardi Voyager (an accounting platform) only two or three times. Under both circumstances, I needed to have excellent computer skills to carry out my tasks effectively. For example, when I did bank reconciliations in Excel, I had to use essential functions like VLOOKUP, SUMIFS, CONCATENATE, IF, AND, OR, etc. to help me throughout the process. I imagine it would be a lot more difficult if I were not good at Excel.
Good Note-Taking Skills or Good Memory
Often time, outstanding reconciling problems cannot be resolved promptly. Some items may remain unsolved for several months before they are addressed. One common reason for this trend is as mentioned above. It takes other departments in the same company a long time to fix the issues on their end. In such cases, accountants need to make high-quality and detailed notes. If accountants do not have good note-taking skills, when they return to the problems in the following months, they may not remember what happened. This situation has occurred to me a lot of times in the past. There was one time when I was lazy to take notes for an outstanding item. I discovered that this error derived from the AP team. Thus, I sent a request to the AP team, asking them to take care of it. After that, I forgot about it. When it was time for me to do the bank reconciliation for the following month, I had no idea why the problem was there. It took me a lot of time to recall what happened. It was also more difficult for me to follow up with the AP team. The AP Manager asked me why I did not touch base with them about this issue sooner. I learned a good lesson that day. To do bank reconciliations properly, an accountant must either have a good memory or great note-taking skills.
Above are the most common challenges that accountants encounter with doing bank reconciliations. I believe there are a lot more, depending on companies’ industries, cultures, and the experience of accountants. I will add more to this post if I can think of anything else.