When the ‘wrong’ bank account was used.

May 2021

Some organisations rather like to keep separate pots of money in separate bank accounts – for example they may have an OSCAR programme alongside other activities, but all the parent payments for OSCAR go into a specific bank account, and expenses are being paid from here. [more…]

Despite best efforts, it is inevitable that sometimes money will be paid into or out of the wrong bank account in this system. Which means money then has to be transferred to/from the ‘right’ bank account. Getting these transfers wrong can cost us a lot of time to correct at the end of the year.

Sticking with the example of a parent paying into the wrong account, here’s what you need to do in your accounting system:

• Categorise the payment from the parent as ‘Parent Fees’ (or whatever name you have for this), even though it was paid into the wrong account and does not ‘belong’ here.
• When you make the transfer to the ‘right’ bank account, DO categorise this as a transfer. In the ‘right’ bank account DO NOT categorise the receipt of the transfer as ‘Parent Fees’. In the ‘wrong’ bank account DO NOT categorise the payment of the transfer as ‘General expenses’ or similar.

Similar situations arise when PAYE or GST portions have to be transferred for payment into the organisations overall administrative account.

How exactly the coding works depends on the accounting software, but all of them will have a separate function for transfers between bank accounts. Using a different method will give you wrong figures for your income and expenses both for the OSCAR programme as well as for your general operations.

Bank Account Matters

December 2022

Changing banks or closing a bank account?

Changing anything to do with your banking has developed into a bureaucratic nightmare in recent years. To stop it from also turning into a bookkeeping or audit nightmare, it is important that you keep all bank statements, or at least a transaction list, from the account you are closing, up to the point where the balance is 0. Also keep any confirmation that the account is closed, and when it was closed.

It is otherwise very difficult to establish what the final transactions in that account were, if questions arise, and any auditor will need to make sure that the account is actually no longer being used.

How many bank accounts do you have?

Many groups have bank accounts that show virtually no activity during the year, or holding money that the organisation considers belongs to someone else. A few of our clients have bank accounts with different banks.

It really does not matter what the money in those accounts represents – if your organisations has signing rights to them, they need to be included in your annual accounts. This includes any term deposit, call or savings accounts as well.

Banked to the “Wrong” Account?

October 2025

Many organisations run one or more distinct and separate activities, for which they often have a separate bank account. Inevitably, people sometimes pay into the ‘wrong’ bank account. [more…]
For example an organisation running a community facility may offer an out-of-school programme out of this facility, for which they keep a separate bank account. For some reason, a parent’s fees may have been banked accidentally into the organisation’s main bank account instead of the out-of-school one.
This often confuses administrators, who will usually transfer the money into the correct bank account, but then use incorrect codes for the two transactions (the receipt of the money and then the transfer) in their accounting system. This can cause a lot of headaches to tidy up at the end of the year, and frequently also leads to GST errors in the process.
Any payment from a parent for the service in this example needs to be coded as a fee payment when it is received, regardless of which bank account it is received into. If it is payment on an invoice recorded in the system, it must be reconciled against this invoice on receipt, again ignoring the fact that it is banked into the “wrong” account. It should not be put into some sort of holding or other unrelated account. GST must be paid on this transaction at this time, not when it is transferred into the “correct” account.
When (or if) the money is then transferred into the “correct” bank account, it must be treated as a transfer. Under no circumstances should a transfer between two bank accounts be treated as anything else, and a transfer should never be reconciled against an invoice. A transfer should also never have any GST paid or claimed on it.
If you want to note the fact that a payment was made into the ‘wrong’ bank account, this can be done as a narrative note to the transaction. However, your accounting system will record the correct amount of parent fees received regardless of how and where it was received. Neither your accountant nor your auditor are interested in which account it was banked into, either – they can see from your accounting system that the invoice was paid.
Separate bank accounts are not a particularly suitable avenues for keeping track of whether a particular activity makes ends meet, or even turns a profit. This can be gleaned much better from your accounting system (if it is set up well). Having many different bank accounts can lead to poor decision making, as people may incorrectly believe that money in some bank accounts is somehow locked away and not available to the organisation.
Please talk to us if you feel you need a better picture of how your different activities are tracking.