Initial Bank Reconciliation

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Introduction
I hope you read this topic before you started entering any of the opening balances or transactions into the Aspect Property Manager because it is essential that you are able to reconcile your new Aspect Property Manager system to your bank account.  If you do not do so the integrity of the system may be compromised.  That's a fancy way of saying you won't be able to rely upon the accounting values in both the system and the bank.

If you don't understand the purpose of reconciliations please read the Bank Reconciliation topic before continuing.  The Accounting Primer may be of use too.  If you know how to use Excel there is a Reconciliation Template located in the ....\PropMan\Utilities directory which you may find useful in achieving a manual reconciliation.

The topic covers the steps required to get the correct money loaded into the new system and reconciled to the rental trust bank account, which for the remainder of this topic will be termed the "bank account" or just "bank".  Also to make explanation easier I have chosen 01 August as the start date for the Aspect Property Manager.

A recurring problem we experience when users change systems is that there are monetary discrepancies and balances in the old system which you obviously don't want to perpetuate.  Frequently we find it does not reconcile to the real bank or if it does it is because there are "fudge figures" in suspense accounts, or phantom transactions have been used, or the actual bank balance has been tweaked at some point to force a reconciliation.

So the procedure below is intended to result in a system which does reconcile properly with the bank and eliminates any errors and confusions being carried over from the old system.

Two special landlord accounts are used, the L9000 Unidentified Items account and the L9900 Balancing Items account, both of which are created automatically when the Clean Up program is run.  (Note the shorthand L9000 where L = landlord and 9000 is the landlord code, S1234 = supplier code 1234).
  • The L9000 Unidentified Items account in normal use will be used to hold, surprise surprise, money which can not be identified so the system can be reconciled until the money's owner can be located.  The equivalent account in your old system may have been one or more suspense accounts.
  • The L9900 Balancing Items account is a "one time use" account as an aid to reconciling to the bank and which should only be required for a month or two at most.
  • When you start entering data make sure the right account is used.  

    Transaction Dates
    To get the money into the Aspect Property Manager and in the right form either a single balance figure is entered or a receipt or payment transaction may be required.   Balances require no dates but when entering transactions use the actual date of the transaction in your old system or the day before the Aspect Property Manager system start date.  For this initial bank reconciliation there should be no transactions dated later than this date (31 July).  If you are unsure of the Transaction Date use the day before the Aspect Property Manager system start date.


    If you are a startup business you can skip to here.


    Recommendations for an established business
    Without a doubt the best time to change between systems is at the end of a period after all possible payments have been made out of the old system.  This should mean that most landlords and suppliers will have zero balances and for reconciliation purposes there will be a bunch of unpresented cheques and DC payments largely representing those payments just made and there will inevitably be a few earlier payments which are still unpresented.

    In your old system, at the end of the month prior to going live with the Aspect Property Manager:-
  • pay out all landlords unless there is a specific reason to hold their balance
  • pay out all suppliers unless there is a specific reason to hold their balance
  • disburse all tenant bonds that can be to the bond centre
  • don't bank new cash or cheque receipts

    The objective is to have as few as possible landlord, supplier or tenant accounts with balances to be entered into the new system.

    Paying Suppliers
    Even if your practice is to pay suppliers on the "20th" of the month I recommend you pay their balance up to and including the last day of the month (July)before the Aspect Property Manager starts.  This gives you a clean cut-off if there are queries at a later date as everything up to the changeover is in the old system.

    Cash and Cheque Receipts
    Only bank cash or cheques received in the last days prior to changeover if the deposit can be made before banking close off and they will definitely appear on the bank statement for the last day of the month  (31 July).  Also make sure they are entered into your old system and paid out in the end of month (July) payouts.  Cash or cheques received after the banking close off must be entered into the new system as normal receipts in the new month (August) after the new system started.


    Categorising the old system Balances
    The next step is to break down the figures from your existing system into the following categories:-
    A   Balances for accounts being retained in the new system after the end of month payout whether they are positive or negative (overdrawn).  These need further dissection into:-
      4 individual landlord account balances
      4 individual supplier account balances
      4 individual tenant Held amounts
      4 individual bonds not yet disbursed to the bond centre
      4 any Fees or GST balance left in the system after the last month's payout (July).
      4 recent unidentified receipts you expect to be able to identify
       I would recommend listing (and entering) individual amounts so they can be "ticked off" as each item is identified rather than just entering a single value.  It does mean more work now but may pay off later.
    Note   Any items not listed will be automatically catered for later in this procedure.

    B   Money which represents all unpresented payments yet to hit the bank.  This will include:-
      4 payments just made to landlords for the last month's activity (July)
      4 payments just made to suppliers for the last month's activity (July)
      4 payments just made transferring your fees and GST to your trading account for the last month's activity (July)
      4 payments made any time previous to the last month's payouts which you expect to be presented and would include those made to or for:-
       landlords
       suppliers
       fees and GST
       bond disbursements
       tenant repayments

    Notes      Where any of the above payments will be shown on your bank statement as a single figure that is all that is required.  There is no need to identify individual amounts that make up the total.
       Any very old payments which have never been presented or are unlikely to be in the future should be excluded as they will be automatically catered for later in this procedure.


    Recap to date
    All balances being transferred from the old system have been individually identified and listed within defined categories which will determine how the money will be handled.
    A list of all individual unpresented payments which are expected to be presented has been made.
    Any unwanted old system balances and unpresented payments have been ignored.

    Notes
  • If you have accounts in your old system with balances, or part of the balance, which you wish to "ignore" and not carry forward into the Aspect Property Manager adjust that account to the amount you want to see in the new system.  This applies to both positive and negative (overdrawn) balances.
  • Any tenant accounts where money is being held must be included as they make up part of the bank balance too.  These amounts may be "on hold" to pay future tenant debts such as water or may also be overpaid rent etc. waiting to be returned to the tenant.
  • Any tenant accounts where rent or debt has been overpaid but the money is not being held in the tenant's account is ignored as it will be either in a landlord's account (and paid out), or in your letting fees and GST account.  Undisbursed bond was identified in step A above and is handled separately.



    Entering the Retained Account Balances
    Before any opening account balances or transactions can be entered into the Aspect Property Manager the First Period Details program must have been run.

    In this step the items you identified as "desirable" are entered into the Aspect Property Manager.  When making these entries, particularly the unpresented payments, various warning and informational messages will appear, such as the landlord having insufficient money.  Most of them can be "ignored" but you should at least read them just in case they do apply to your situation.

    1   Enter any landlord balances, positive or negative, retained in the trust account into each landlord's account using the Setup > Getting Started > Landlord Opening Balances program.

    2   Enter any supplier balances, positive or negative, retained in the trust account into each supplier's account using the Setup > Getting Started > Supplier Opening Balances program.

    3   Enter any undisbursed tenant bonds in the trust account into each tenant's account using the [Receipt] button on the Tenant > Transactions grid.
      4 Make sure you zero the defaulted Rent amount.

    4   Enter any tenant money held in the trust account retained to pay future rent, debt, letting fee or bond into each tenant's account as Held using the [Receipt] button on the Tenant > Transactions grid.
      4 Make sure you zero the defaulted Rent amount.

    5   Enter any receipts which you expect to identify as belonging to a tenant or landlord into the L9000 Unidentified Items account.  As was recommended above enter each amount individually using the [Receipt] button on the Landlord > Transactions grid. 
    Note  Although a single amount (positive or negative) could be entered with the Landlord Opening Balances program it is not recommended as one facet of this account is there should always be two equal and opposite value transactions which cancel each other out.  By entering a series of individual transactions you can transfer the individual parts as they become identified one by one.  Also you may only be carrying part of the value from your old system's equivalent account(s) by whatever name it went (Suspense, Unknown etc.) into this account and the remainder will be in the L9900 Balancing Items account and in effect "lost" in the conversion. 


    Checking your entries
    Run the following reports and check the balances against your old system balances
  • To check the Landlord Balances print:-
      4 either the Setup menu > Getting Started > Landlord Opening Balances Report which prints all the landlords loaded into the system
      4 or the Landlords menu > Reports > Landlord Balances which shows only landlords with balances (or transactions).
      4 At this point the only accounts with transactions should be:-
       the L9000 Unidentified Items account.  The balance may be different if only some unidentified amounts have been transferred to the new system.
       and the L9900 Balancing Items account.  Ignore this balance completely at this point. 
  • To check the Supplier Balances print:-
      4 either the Setup menu > Getting Started > Supplier Opening Balances Report which prints all the Suppliers loaded into the system
      4 or the Suppliers menu > Reports > Supplier  Balances which shows only suppliers with balances (or transactions and there should be none at this point).
  • To check the Tenant undisbursed bonds print the Bonds menu > Reports > Bonds Held report.
  • To check the Tenant Held amounts print the Tenants menu > Reports > Tenant Held report.

    Correct any errors and only when the values are correct go to the next section.


    Entering the Balancing Items Balance

    Important  The balances and transactions entered in the 5 numbered steps above and the checking must be complete before proceeding

    6   Display the Admin menu > Control Reconciliation screen and locate the Bank figure in the Current column and take note of the sign.  This is the total value of the accounts which have balances to be retained in the new system.  It consists of the landlord and supplier balances entered plus any transactions entered as unidentified items, undisbursed bonds and tenant held amounts.
      4 If this Current Bank figure is positive deduct it from the bank statement account balance.  If it is negative add it.
      4 Enter the result into the L9900 Balancing Items account as the opening balance using the Setup menu > Getting Started > Landlord Opening Balances program.
      4 Re-display the Admin menu > Control Reconciliation screen and check the Bank figure in the Current column is the same as the bank statement balance.  If it is not the entry is wrong.


    Entering the Unpresented Items
    A smart move before continuing with the next step would be to take a backup.

    All the unpresented payments you expect to be presented on the new month's (August) bank statements must now be entered into the L9900 Balancing Items account as transactions.  The objective being to have one identifiable transaction entered in the system for each individual item which will appear on the bank statements subsequent to the changeover date.  The reason for making all the entries in the one account is purely for simplicity.  It means that most of the entries associated with the "old" system are in one place rather than being scattered in accounts all over the system. 

    7   Make your entries using these guidelines:-
      4 All unpresented cheques are entered as a series of individual payments.
       The cheque number must be entered as should the Payee name.
      4 If any of the DC  payments made will appear as an individual item on the bank statement a separate DC payment should be made.  
       You should enter the Payee name and ideally the bank account code the payment went to.  The bank account code must be valid.
       As a short cut you could make the Payment Method a cheque and enter "DC" in the cheque number field.
      4 Where a group of payments to landlords, or suppliers, or your Fees and GST, have been paid by a single bulk DC payment and a single figure will appear on the bank statement then a single payment to that value should be entered.
       Here it is probably easiest to enter "Bulk Payment" as the Payee name and make the Payment Method a cheque and enter "DC" in the Cheque number field.


    Another Recap
    The landlord and supplier balances for accounts to be retained in the new system have been entered.
    Transactions representing unidentified items have (hopefully) been entered as individual entries.
    Undisbursed bond has been entered into each tenant's account as a Bond Receipt.
    Any amount being held to pay for future rent or debt has been entered into each tenant's account as a Held Receipt.
    The difference between the total of the above and the bank statement balance has been entered as the opening balance of the Balancing Items account.
      4 What has been done is to say "if we deduct the money we reckon belongs to landlords, suppliers or tenants from the real bank account money what ever is left has to pay the unpresented items and any discrepancies which existed in the old system".
    The unpresented items have been entered as transactions which should be matched against bank statement entries over the next short time (in August).
    Any balance shown in the L9900 Balancing Items account is the net result of excluding any of the following from the new system:-
    balances in defunct accounts
    part balances being written of by only transferring a portion of the balance
    errors or deliberate tweaks in the old system to reconcile to the bank.

    This last item is not being cavalier on our part.  It is not our responsibility to reconcile your old system.  We are responsible to make sure the Aspect Property Manager does reconcile to the bank when you start off.


    The Initial Reconciliation
    At this point the system may contain receipts in tenant accounts and the L9000 Unidentified Items account which represent money that appeared on bank statements in the past and we assume was reconciled to the bank statement(s) at the time.  These transactions make up part of the real bank balance at the changeover date.  So we need to complete the first system reconciliation by presenting those receipts.  This is done using the inbuilt bank reconciliation function.
  • Go to the Bank > Enter Bank Statement Details screen
  • Enter the date one day before the system started (31 July)  in the Statement Date field.
  • Enter the bank statement balance (closing balance 31 July / opening balance 01 August)
  • Click anywhere on the grid.
  • There should be no red text lines.
      4 If there are it is because the transaction  after the changeover date (01 August).
      4 Exit this screen and change the dates as recommended in the Introduction section at the top of this topic.
  • Double click the receipt lines for the tenant and the L9000 Unidentified Items account receipts you entered making the text on each line turn bold, indicating it has appeared on a bank statement.
  • When all the relevant lines have been selected, the values in the Presented and Difference boxes at the top right should be the same.
      4 If they are not an error has been made.  
      4 Check the lines selected and the values of the entries.
      4 Go to the Enter Bank Statement Details screen topic for more information including how to go about finding errors.
  • DO NOT change the Closing Balance to obtain a reconciliation.  That's how the old system got out of whack!!!
  • Once the Presented and Difference figures are the same you will be able to press [Complete] until then [Close] must be used.


    Back up your system now it is reconciled before entering any further transactions.  This will be your fall back point if things do go "pear-shaped" and I'm sure you don't want to repeat all this work again.


    After the Reconciliation is Complete
    Once the [Complete] button has been clicked on the Enter Bank Statement Details screen the presented (bold) transactions will be flagged and will no longer appear on subsequent reconciliations.  Nor can they be changed accidentally.

    The system now meets the two objectives of having the correct account balances and the system reconciling to the real bank account balance at the change over date.  Any oddities and discrepancies have also been excluded from the Aspect Property Manager by using the L9900 Balancing Items account.

    But there may well have been a balance on that account after the unpresented items were entered in numbered step 7 above.  Possible causes which resulted in any balance were covered above.   I would be inclined to leave well alone for say a month until any changeover "oopses" have been fixed but after that the account should be cleared and never used again.
  • If the balance is positive it means you had more money in the actual bank than was required within the trust account accounts and a Landlord Payment should be made to your trading account.  This doesn't seem to happen that often.
  • When the balance is negative it means more money was paid out of the trust account than should have been and this much more common occurrence requires a payment from your trading account to your trust account where it is receipted into the L9900 Balancing Items account as a Landlord Receipt.



    Start Up Business

         XXXX     

    If you are a start up business and there is no money in your bank account  .....
    If thsre is money in the bank acount you will need to enter that into the system by performing steps xxx above
    Who does it belong to LL  do this ....    self because bank wanted an o/Bal do this ....