WE ALL KNOW that accounting systems and practices are touched with a special kind of magic. (Have you been following the Enron trial? The CEOs there seem to have thought CFO Andy Fastow was some kind of Paul Daniels figure. “You’re going to like this balance sheet… not a lot!”) But anything of any import eventually passes through the bank account. It’s the ultimate reality check. So, keeping an eye on the cash book and the bank statement is one of the biggest no-brainers. It’s equally clear that the only way to keep the cash book under control is to successfully complete a bank reconciliation on a regular basis.
Do I sound impassioned about this? You bet I do. And if you think it sounds as if Mr Sense of Humour has moved out of my life, you’d be right. Say hello to Mr. Cock up. Mr. Up arrived courtesy of FD. The guy’s never seen 2001: A Space Odyssey, so he still harbours notions that really, really smart machines are A Good Thing. He’s always trying to undermine my confidence, telling me “your spreadsheets are so last millennium” and will one day be replaced by machines that will effortlessly (i.e., people-lessly) produce perfect accounts. Until recently, his best example of my imminent extinction was the automated bank rec.
After last year-end, FD said the rec was being upgraded as part of the Controlled Risk Activities Project, or something like that. The old way of doing the rec – getting a spreadsheet jockey to crunch the numbers – was abandoned. When I suggested parallel running for a business period or three I was accused of being a Luddite – like I’d spilled frapuccino into the BI server or something. Ach, you’ve got to pick your battles, so I forgot about bank recs. Until….. FD swung into the office late one afternoon a month or so back, flapping like a Labour minister trying to explain the meaning of the phrase “commercial interest rate”. Once we calmed him down, it transpired that the sleek new bank rec had inexplicably fallen over after months of chugging away quite happily. The supplier couldn’t understand why, and since the “in-house” IT department is now six time zones away, all we were getting was voicemail. Worse still, the unmistakable build up of static in the air was a sure sign that the auditors’ shiny suits were about to come marching through the door. “We,” said FD, “could be in trouble.” We worked out that the software had corrupted, and there wasn’t any coherent bank rec anywhere in Blaminio for FY 2005/06. Not even a hard copy.
Obviously, the only solution was to go back to basics. Hello “last millennium”! We dusted down the bank rec spreadsheet, had a quick glance to see if the formulae still made sense and then we got on with it. OK, it was a mammoth task. Not only did we need to reconcile the bank accounts for the year end, but under the agreement with the auditors to keep fees down, we had to prove that we’d done the bank rec on a weekly basis. And they do have a sneaky habit of random sampling, always asking for the August recs and those for periods when Bank Holidays come thick and fast - like we’d ever let it slip just because the office was empty!
As part of the improved relationship
with the bank, we have online access to all our transactions, which I downloaded
into Excel. That saved weeks of
re-keying errors. Within 24 hours, we had a tab for each rec right back to
the start of this FY – and everything reconciled to the penny. (I’d
have preferred to be a little bit out – if I was auditing it, I’d
think total accuracy was a tiny bit odd…) No doubt a new, enhanced automated
bank rec system will appear with non-corruption promises as long as your arm.
Even so, FD has told me on the QT to keep the manual rec going “for a
while”. Ha! You can automate the finance function all you like. But keeping
me gainfully employed to make sure the machines don’t screw up? Now,
that’s magic.