Are You Reconciling Deposits…?
Over a year ago, I wrote about accounts receivable general ledger reconciliation. This issue examines a similar process – reconciling security deposits.
Security deposits should be reconciled with the general ledger just as your accounts receivable is.
Deposit bank accounts
Many utilities keep security deposits in a separate bank account from the operating cash account. This makes reconciling deposits easier, but doesn’t do away with the need to do so.
If you don’t maintain a separate bank account for deposits, it’s especially important to insure that deposits are reconciled.
Does your billing software interface with your general ledger?
As mentioned in the issue regarding reconciling the general ledger, in today’s market any reputable billing software should be capable of interfacing to a general ledger system. So, if yours isn’t, it might be time to consider new billing software.
General ledger entries for deposits
Even if your software doesn’t interface with the general ledger, you should still enter manual journal entries to complete the process.
A few issues back dealt with improving the process for applying deposits. That issue included a T-account detailing each step in the process, if you missed it.
The deposit reconciliation process
The key to reconciling deposits is to insure that the balance of the customer deposit general ledger account(s) (the control account) agrees with the detail report(s) of deposits from your billing system (the subsidiary ledger).
If you maintain a separate cash account for deposits, the balance of this bank account should also agree with the control account and subsidiary ledger.
This reconciliation should take place regularly, at least monthly.
If I’m not reconciling, how do I get started?
Much like the process of general ledger reconciliation, reconciling deposits involves running the necessary report(s) from your billing system and comparing the totals to the deposit account(s) in the general ledger.
If the amounts agree, your work is done. If they don’t agree, you will need to research the difference, correct the general ledger interface setup, enter an adjusting journal entry and repeat the process tomorrow.
Initially, I recommend repeating this process daily. That way, if you are out of balance, you only have one day’s work to look through to find the difference. Once you are confident that everything is set up correctly and the process is working flawlessly, you can discontinue the daily process and make it part of your month-end routine.