Bank difference

Bank difference

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My client hasn't reconciled his bank - ever. Previous agent (big accounting firm) just left the difference.  Difference in 2014 £7k, difference in 2015 £5k.  I want the client to write it off and start from the new year with a bank account balance that can be reconciled monthly.

The write off is a CR to the P&L.  What do I do with this for tax and VAT? Where is the best place to post this in the accounts.  Small Ltd Co ( has bank lending), Turnover £500k, profit £40k

Replies (24)

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By petersaxton
30th Sep 2015 18:22

Why?

Just don't bother. It's worked before!

Why bother getting anything right? It's easier to make up the numbers.

If you are determined not to sort out the problem then by all means just do it. You have to pay tax on part of the credit. You have to call part of the credit VAT. What about posting it to "Unknown difference"?

If I took on the job I would reconcile the bank properly. It doesn't take all that long. Unless the reconciliation needed goes back 30 or 40 years! But you didn't tell us that.

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RLI
By lionofludesch
30th Sep 2015 20:53

Clients

None of my clients has ever reconciled their bank - ever.

I do it.  Bit tedious but it's not difficult.

And no excuse for not doing it.

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By Sheepy306
30th Sep 2015 22:28

Could be anything
Remember that the £5k difference is just the net difference between all the unentered or incorrect debits and credits , what's to say that the difference doesn't consist of £100k of undeclared sales income and £95k of fixed asset purchases or directors personal expenses, or any combination of any P&L and balance sheet items.
Doing nothing about it is just entirely wrong, estimate how long it's going to take you and tell the client upfront what the cost of it will be, shouldn't be too long to be honest.
Even if the client wasn't willing to pay then I'd probably do it just for my own peace of mind, and PII cover.

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By zarathustra
30th Sep 2015 22:47

I think your suggestion is sensible

Write off the difference to the P&L and get it on a decent footing going forwards. The £5K isn't particularly material so I would probably just post to sales or purchases.

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Replying to stepurhan:
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By B Roberts
01st Oct 2015 09:56

I agree ....

zarathustra wrote:

Write off the difference to the P&L and get it on a decent footing going forwards.

.... with this.

I assume that this is a new client and they are not looking at paying you to do a bank rec. going back x number of years ?

These things can be like a can of worms and there may be multiple errors going back years and years - given the amounts and the situation I would focus my energies on ensuring that the bank is fully reconciled moving forward.

I would clear the decks and move out the reconciling balance (if you are ultra prudent you could leave this on the B/S).

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By GR
01st Oct 2015 06:48

You could just leave it in other creditors- it's not your error. Wherever you put it in the accounts would be wrong (it might not be sales, it might be dla). Or do what the previous accountants did and c.f. Reconciling could be difficult depending on how many years we are talking about, how many transactions, how many cheques issued, etc. How did the previous accountants do their bank rec statement? You should let the client know.

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By petersaxton
01st Oct 2015 07:04

Easy reconciliations

Whenever I have had to do a reconciliation for several years I would try to get both the accounts by the client and the bank in Excel. You put the information in separate columns and separate rows of a spreadsheet and by using sorting and matching you agree what you can and are left with the differences. These are the reconciling items. You then do the corrections. Now your accounts are correct - not in any year but in total. The client pays the right amount of tax. I don't see what is difficult.

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By johnjenkins
01st Oct 2015 10:03

I was taught

to balance the bank to the penny and I still do. There is no excuse for not doing so. Larger firms just write it off if they deem it to be "not material". How can any difference be "not material"? Come on Thomas, are you an Accountant or do you just play at it? You know what you have to do so stop whinging and get on with it.

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Replying to JCresswellTax:
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By B Roberts
01st Oct 2015 11:11

Reconcile

johnjenkins wrote:

to balance the bank to the penny and I still do. There is no excuse for not doing so. Larger firms just write it off if they deem it to be "not material". How can any difference be "not material"? Come on Thomas, are you an Accountant or do you just play at it? You know what you have to do so stop whinging and get on with it.

It seems to me that the OP is looking to get a straight edge with a new client and has the intention of reconciling the bank moving forward.

Not sure if the "are you an Accountant" comment was needed.

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Replying to JCresswellTax:
Time for change
By Time for change
01st Oct 2015 11:59

Sounds a little like the firms

johnjenkins wrote:

to balance the bank to the penny and I still do. There is no excuse for not doing so. Larger firms just write it off if they deem it to be "not material". How can any difference be "not material"? Come on Thomas, are you an Accountant or do you just play at it? You know what you have to do so stop whinging and get on with it.

which condone this type of attitude - "not material"?

Surely the foundation for financial responsibility and probity is; foundation and accuracy (to the penny)?

One only has to look back, over the last few years, with the breakdown of confidence in; the banking movement, MP's expenses and the recent debacle at VW, to see that, no matter how you try to bend and twist the rules, at some stage, the sour cream, always comes to the surface.

If you can't be arsed to do the job properly, don't carry on in the job.

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By petersaxton
01st Oct 2015 10:23

What has payment got to do with it?

Tell the client the bank needs to be reconciled properly and what the cost would be and if they are willing to pay then do the work.

If they wont pay then don't take them on as a client.

It's simple.

Just not reconciling bank accounts is crazy.

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Replying to atleastisoundknowledgable...:
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By B Roberts
01st Oct 2015 11:13

Payment

petersaxton wrote:

Tell the client the bank needs to be reconciled properly and what the cost would be and if they are willing to pay then do the work.

If they wont pay then don't take them on as a client.

It's simple.

Just not reconciling bank accounts is crazy.

I will not try to teach you how to suck eggs, however the current bank balance is made up of all transactions going back to day 1.

As such the difference could be made up of multiple items going back many years - are you suggesting that the OP should do a bank rec going back 20 years ?

Of course the payment is important - you said yourself that if the client wont pay for this work then you would walk away, therefore you feel that payment is important.

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Replying to Tax Dragon:
By petersaxton
01st Oct 2015 11:34

Payment is important but don't offer poor quality work for free

B Roberts wrote:

petersaxton wrote:

Tell the client the bank needs to be reconciled properly and what the cost would be and if they are willing to pay then do the work.

If they wont pay then don't take them on as a client.

It's simple.

Just not reconciling bank accounts is crazy.

I will not try to teach you how to suck eggs, however the current bank balance is made up of all transactions going back to day 1. As such the difference could be made up of multiple items going back many years - are you suggesting that the OP should do a bank rec going back 20 years ? Of course the payment is important - you said yourself that if the client wont pay for this work then you would walk away, therefore you feel that payment is important.

What's wrong with doing a bank reconciliation for 20 years if you can? It should have been done earlier so why shouldn't it be done now? 

I didn't say the payment wasn't important - that's why I work.

I am talking about whether the payment should decide the quality of your work.

Even if the accountant decides to write away the difference on the bank with a journal they would still have to do a lot of work on the debtors and creditors. It looks like they don't have any relationship with reality either. Does the accountant send a letter to all customers and suppliers and ask what their balance is and adjust the accounts to the balance they say or do they investigate the differences?

Nobody seems to know how long there was a mess for or whether the scale of the mess recently was sufficiently small to write off at a certain point. I realise that a difference of £10 could be errors one way of £10,000 and another way of £9,990.

It's interesting the client expects the accountant to deal with all this without being paid for it.

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By thomas
01st Oct 2015 10:46

I agree that the bank rec gives you assurance that somehow, somewhere, all the transactions are posted. I agree that a £5k difference(£2k in the year) still means that multiple transactions could have been missed.

The client is not willing to pay to sort out what could be years of bank recs.  It's not an audit. The way they post in Sage is wrong, everything is by journal and is in lump sums which can be agreed to a manual cashbook I believe.  I can't just export to excel to do a quick reconciliation.

I may still walk away as it looks like the debtors and creditors control accounts don't balance either so it may be more hassle than its worth.

I think I can fix it going forward, if I can write off the carried forward difference.Client would then be in a much better position and would have no excuse not to balance the bank.

I still can't believe that the previous agent just left it......

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By petersaxton
01st Oct 2015 11:07

Still Excel

So you have a manual cash book which you have to agree to Sage journals. You can enter the manual cash book into Excel and should be able to download the bank statements to Excel. You don't seem to know how far back the lack of bank reconciliations go. Don't you have access to all the transactions?

You'll have to adjust the debtors and creditors as well. I would expect that you would have to reconcile the debtors and creditors to customers and suppliers, too. 

Why doesn't the client want his accounts done properly?

If I talked to a potential client with that attitude I would turn down the work.

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By mrme89
01st Oct 2015 11:14

Bank doesn't balance.

Creditors don't balance.

Debtors don't balance.

 

I think the sensible thing to do would be to start with getting the bank reconciled.

 

If the client doesn't want to pay you to do it, and doesn't want to do or can't do this themselves, I agree with Peter that you should turn down the work.

 

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By paulwakefield1
01st Oct 2015 13:24

Guilty yer 'onour

I will write off very small bank differences if I know the underlying bookkeeping is competent especially when there is a high volume of complex transactions. There is nothing to be gained by searching for it. And, yes, a small difference might be two large opposite and nearly equal errors but an apparently perfect reconciliation may have two massive and opposite errors (I have seen that happen).

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By johnjenkins
01st Oct 2015 14:12

@B Roberts

I made the comment purely because an Accountant of substance would not have posted "what do I do with Write offs for tax and vat purposes?" "where is the best place to post this in the accounts." Do you not agree?

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By stanbu
01st Oct 2015 14:34

Current year

In order to have confidence in the accounts that I am producing, I think that I would reconcile at least the current year. That might give a clue as to what is going on and the client can be advised accordingly on how to avoid the mistakes. Based on that, I would then take a view on the previous years, with the consent of the client.

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Replying to User deleted:
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By thomas
02nd Oct 2015 13:13

Current year

stanbu wrote:

In order to have confidence in the accounts that I am producing, I think that I would reconcile at least the current year. That might give a clue as to what is going on and the client can be advised accordingly on how to avoid the mistakes. Based on that, I would then take a view on the previous years, with the consent of the client.

Seems a sensible approach, thank you. That is what I'll do.

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By thomas
16th Oct 2015 10:03

I've resigned.  I received a

I've resigned.  I received a really snotty email and 2 voicemail messages yesterday evening from the client when I requested that they review the PAYE account which didn't balance and the bank account information for the year so I could tick the bank, which I was willing to do in my time.

It feels really unprofessional to walk off a job.  I will have about 3 days work to write off to a bad experience. I have been there for multiple meetings, multiple phone calls none of which I have billed for.

I think at this point, that even if I continued and corrected the accounts, the client would see no value in what I had done.  They just saw my requests for information as unreasonable.

 

I hope I have done the right thing...

 

ARGHHH  Bloody clients (annoyingly I suspected a while ago they would be a pain to deal with and once again, my instincts were correct.)

 

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Time for change
By Time for change
16th Oct 2015 11:00

I think, on balance

you'll find that the decent client's far outweigh the others.

From time to time, if might not feel that way.

Take pride in your work and have principles.

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By thomas
16th Oct 2015 11:02

Thank you Time for change.  I

Thank you Time for change.  I hate confrontation but I had got to the point that even if I went the extra mile, the client wouldn't have been happy with the work that I completed, so really... what's the point?

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By Andp
16th Oct 2015 12:34

always always trust your gut instinct . Just completed year 3 company accounts for a client  and the VAT was a complete mess - gross sales only £80k - Always been on a cash basis then they switch to invoice basis half way through the year . Then back again to cash basis !!! Took us an extra 8hrs to find the reconciling items - can I charge extra - maybe ?  will I - no as I do not need a 2 hrs email battle costing me more time 

do they need a new mug accountant = YEEESSS

I wish I had gone with my gut 2 years ago on this one !!!!

 

 

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