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Online bank statements and the end of bookkeeping?

Online bank statements and the end of bookkeeping?

I have only recently come across software (free shareware!) that not only downloads online statements but also uses import rules to analyse regular transactions into categories or nominal accounts. This not only reduceds the time it would take to do a bank and credit card reconciliation to minutes rather than hours/ days, but can also makes the posting 100% accurate.

Does the signify the end of bookkeeping as we know it and why havent I heard about this before?

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By Anonymous
16th Nov 2009 12:12

Because......

you might just spend more time correcting the mistakes than entering the transactions directly.  There are several other issues e.g. how would it know which invoices to allocate a payment to?

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16th Nov 2009 12:27

It's cropped up on AccountingWEB.co.uk before

There was quite a bit of debate around this whole topic back in 2006, stimulated by David Carter. Once he realised the significance of the concept, he thought that it could provide the way forward for a lot of small businesses. MYOB (now heading to the software recycle bin) and a few other desktop accounting software packages support bank statement imports, as do one or two of the online providers, including Xero.

If you'd like to revive the dicussion, here are some of the original pieces on the subject:

Electronic cashbooks for the 21st century
"Bank reconciliation? What's a bank reconciliation?"Tutorial: Using Excel with downloaded bank statements

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John Stokdyk, Technology editor

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16th Nov 2009 13:03

Love the link John!

I see that 3 years ago, people were recommending 'More' software and Microsoft Office Small Business Accounting.

Whilst this could work for some, in the real world I can see it saving very little time because of the need to check how certain payments have been analysed.

For example, how would the software differentiate between payments to an insurance company for motor insurance, business insurance, house insurance, pension premiums, life insurance etc. How would it know whether payments to HMRC are for VAT, PAYE, corporation tax, income tax, class 1A NIC or whether payments to a director/shareholder are dividends, wages, rent for using their home, repayment of expenses or to reduce their loan account. Goodness knows how it would analyse a payment to Tesco's given the range of goods they sell nowadays. I'd love to see it analyse a cheque book or paying in book.

"This not only reduceds the time it would take to do a bank and credit card reconciliation to minutes rather than hours/ days, but can also makes the posting 100% accurate" - I don't think so.

 

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By 3569787
03rd May 2016 19:23

At most an automated Bank Rec.

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16th Nov 2009 18:30

developer

thats why QB rec is a doddle , thro use of composite deposits to reconcile

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16th Nov 2009 20:37

It's the way forward...for suitable clients

I've designed an excel based system, and when a client emails me their online bank statements, I manipulate it into the spreadsheet, and it prepares the VAT return and bookkeeping for me. Only for cash accounting clients at the moment, but I'm going to develop it further. Admittedly, I do have to check it afterwards, and make corrections, but it saves at least 50% of the time doing it this way.

 

Just for info - what is the freeware software you have found?

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16th Nov 2009 20:45

I'm using this and love it

Since the Software Satisfaction Awards I have moved over to The Cloud for my accounting software and use Kashflow. In common with many, I suspect, it will allow me to import both bank and credit card statements. I set the default payment type to "Misc", so they all show up as this, then just whiz down with a drop down menu for each item and change the payment types to whatever it is, adding VAT codes as I go if necessary. By doing this I know what I have analysed and what I haven't, but it allows me to code up the bank much quicker than the old way. No mis-types either. Almost 100% of my customers pay me by BGC so that is easy too & no typing in text descriptions for payments from credit card - loads for me with hotels, meals & petrol every day - my business credit crad statement is around 6 pages per month. A few clicks and it's done - rather than a whole day laboriusly entering data.

When I'm really happy with it I may then recommend it to my bigger clients. I have some for whom a typewriter / calculator would be a challenge so clearly not them!

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17th Nov 2009 09:06

Doh
the idea behind a bank rec is that you make sure the bank position reflects the underlying transactions. If you are posting the bank direct from the bank statements then the bank position IS the underlying transactions!

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17th Nov 2009 09:34

freeware
ace money

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By paul.k2
17th Nov 2009 13:46

The Banks

I am an IT Consultant and I am actively looking at the use of bank statements for clients with incomplete records (forgive me if I have used the terminology correctly).

 There is one problem that I cannot get around and it’s THE BANKS. For this system to work effectively for any practice, the banks have to give the practice access to an electronic statement. Ideally this would be a push /pull service that the banks customer would subscribe to. Try getting the banks to help. I have spoken to 4. 3 were more than willing technically to help, but fell over at compliance, and the fourth, a Scandinavian owned bank !!!!! would not even consider it. Paul Kelly www.kellysolutions.co.uk

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18th Nov 2009 13:56

BACS payments are aggregated on bank statements too.  I do think that the ability to download and match transactions into the accounts software to speed reconciliation is a must.  I have checked out some software that does this but my existing online software, Liberty Accounts, has an integrated online payroll, so I would lose that, so it is not worth moving.  The banks should provide read only access for professional advisers to bank accounts so that we can download transactions.

Ray

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By Anonymous
18th Nov 2009 23:41

OCR anyone?

I have recently got to grips with my all-in-one printer. OCR (optical character recognition to give it its Sunday name) to Excel is brilliant! I now scan the bank statement and up it pops as an Excel spreadsheet. Fine for spreadsheet work - maybe wants some tweeking if you are then going to import to another package.

Just a thought!

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By DMGbus
19th Nov 2009 08:44

Problem with relying on bank statement entries
"Doh

the idea behind a bank rec is that you make sure the bank position reflects the underlying transactions. If you are posting the bank direct from the bank statements then the bank position IS the underlying transactions!"

The bank statement entries themselves are only a starting point for accounting records.

Problem is that unpresented transactions can very easily get overlooked.

EXAMPLE: This happenned with a new client - a Wine Bar - that I had many years ago to prepare year 2's accounts : cashbook was written up on the basis of bank statements so all seemed fine and smooth running.  Supplier statements were used as a basis of creditors in the year end accounts.  So, what could go wrong ?  £10,000 did go wrong.  A cheque had been sent to a supplier for £10,000 a few days before the first FYE and the supplier had deducted this on the FYE statement of account, the resulting creditor balance was then used in the accounts.  As a result the Wine Bar's first year's accounts showed a break even position when in fact a £10,000 loss had been incurred - a direct result of over-reliance on the concept that the bank statements were an accurate reflection of all of the bank account transactions.  The error was found when I prepared the second years accounts and I found that I had a much lower GP % than year 1 and a loss of over £20k compared the previous accountants's break-even figures for year 1.   No problem with year 2's year end cut-off point (as unpresented transactions were looked for for proper inclusion / adjustment in the accounts), pity that this hadn't happenned with year 1's accounts.

 

 

 

 

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19th Nov 2009 11:42

a nifty tool

for those that can cope with it - you have to be adept at spotting the possible problems.

 

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By Anonymous
19th Nov 2009 11:52

Which software?

 

Please could the poster of the question state which software he is using.

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23rd Nov 2009 16:03
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By Anonymous
23rd Nov 2009 16:10

One example - Barclays

One example is this is a funds transfer. A Barclays transfer advice will show narrative upto 35 digits for BOTH the Payee and the Payment Details. On the bank statement this is truncated to some 16 and 10 digits respectively. In the age of electronic data transfer, I fail to understand the reason for this.

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04th Dec 2009 10:02

Money saver - use Excel

The main problem with info lifted from bank statements has been correctly identified as picking up un-presented amounts, but that can be sorted by cheque number counting and ensuring you have bank statements for at least three months post year end…not unrealistic for small businesses.

 

Just using Excel, copy this info over from a “bank account spread sheet” to new “bank payment” and “bank receipt” sheet, then delete irrelevant data to allow that copied data to be analysed separately.

 

The Excel sort facility allows you to collate similar amounts and correctly enter a common analysis/nominal description, example being “DRAWINGS” or “LIFE ASS[***]” to the side of DDR’s with a specific amount. You can then sort the info again to show all payments by date or grouped and subtotalled by analysis/nominal heading.

 

I have done this since around 2001 and, along with master financial accounts on Excel, allows the timely collation and presentation of quality information that beats Sage and Iris hands down. Obviously, also a significant money saver.

 

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By Anonymous
04th Dec 2009 10:31

Thanks Trevor

and even sequence checking can be done simply on Excel too - I have my own "sequence checker", based on simple if...then... conditions.

 

 

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05th Dec 2009 13:25

i note that quicbooks US has this facillity

so one would presume that its on its way over here

presumably people want this facility because they do not want to or cannot be bothered or are too busy ahem to enter the transactions - QB is a doddle to bank reconcile 

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05th Dec 2009 13:42

'Reading' printed bank statements into Excel

There is software which can 'read' printed bank statements and transfer the information from them into Excel - but it ain't cheap!

It is used in money laundering and other criminal investigations.

In effect the prosecution (because they usually do this) obtain the past (printed) bank statements for, say, the last 6 years for persons / companies / accounts they are interested in and then input these into spreadsheets (using the 'reader') for later analysis.

That analysis does not need to be sophisticated in accounting terms.  Basically, in confiscation proceedings for example, a credit (i.e. deposit) to the bank account is assumed to be proceeds of crime.  That's it.

It is then for the defendant to show that any particular credit is not proceeds of crime by showing what it actually is and that that is legitimate. (This is often where I get involved.)

However most prosecutors do make the effort to exclude obvious money transfers from one account to another as proceeds of crime in the account to which the funds are credited.  They will also exclude obviously legitimate items which they identify (like wages received by direct credit from legitimate employment).

I did however have a tax fraud case in which the alleged underdeclared profits per HMRC figures included a second mortgage and other loan advances (which had been treated as trading income).

David

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