Frequently Asked Question

3 How to do Bank Reconciliation Properly
Last Updated 6 months ago

The process of reconciling ledger entries with the bank is very simple and 'natural'.

If you use the system correctly, reconciliation will happen automatically without any special work or effort.

All that needs to be done is to ensure that the payment references on ledger entries (Rent, Expense, Invoice) match the corresponding banking transaction.

This will happen naturally if the work flow in the office is done in the proper order and in a timely manner. Let us look at some examples.

  1. Cheque payment: Go to the Pay Cheques screen and 'pay' individual or groups of expenses. You will be asked to enter the cheque number and the expense(s) are automatically updated with the cheque number.
    When the recipient banks the cheque, the payment will appear in the bank with the cheque number as the banking reference. The two will automatically reconcile without any further action.
  2. On-line Payments: Here a lot depends on how your bank works with respect to the banking reference that it uses.
    Some banks allow you to enter the reference that you want to appear on your own bank statement. If this is the case then this is really identical to Cheque payments except that you are allowed to make up your own reference.
    Be sensible and keep to a standard methodology - use the Supplier's name, leaving out any spaces or punctuation.

    Unfortunately, many banks do not allow you to do the above. Their system insists, prior to payment of a new payee, that you set up the payee on their system with a fixed reference that will be used every time you make a payment to this payee.

    Again, simple planning will make reconciliation automatic. Agree within the office what rule you will follow when making up the reference in the first place. We recommend you take the payee's official name and take the first 10 characters (ignoring spaces and punctuation).
    Then, when it comes to making a payment to a particular supplier you just use exactly the same rule when specifying the payment reference.
    Again, reconciliation will be automatic
  3. Cheques lodgement: At the start of the day the next paying-in slip is set aside. Its number is then used as the payment ref for each Rent or Invoice ledger entry that is entered on receipt of the cheque.

    At the end of the day the cheques are lodged at the bank together with the relevant paying-in slip. The lodgement will then appear in the bank with the paying-in slip number. Again, reconciliation will take place automatically.
  4. Automatic Rent Posting: Where a tenant pays rent into the bank, typically via a Standing Order, PropPack can automatically post the ledger entry from the bank statement as it is uploaded from the bank.
    When a new tenant is entered into the system, PropPack can print a standing order form with a special unique payment reference that will be recognised as belonging to
  5. Cross-Company Reconciliation: It should be noted that where a Client Account is used for banking transactions relating to more than one Company, Bank Reconciliations can be done cross-Company just as easily as for a single Company.

    If we look at a single payment made to a Supplier we could find that it was made on behalf of several companies. For example, a Managing Agent could use a single supplier to do EPC inspections on behalf of many Managed Companies.

    When such a payment is made, it makes sense to make a single payment for all outstanding expenses. So we would have many expenses from different Companies reconciling to a single Bank entry.

    PropPack handles this and keeps track of all Company balances within the bank account.

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