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.