Vertigo: “Confusion resulting from misleading information sent to the brain.”
Vertigo occurs in pilots when they fly in hazy conditions and lack any reference to the reality of the horizon. Without reference to objective truth, the horizon, it is possible for pilots to fly their airplanes into the ground while thinking they were flying level.
Church accounting systems can also suffer vertigo. Unless there is a connection to objective truth outside the system, the accounting may become out of touch with reality – possibly causing a crash to the ground.
Whereas a pilot uses the horizon as their objective truth reference, what could possibly supply such an important point of reference for a church? The monthly bank statement is the bank’s objective truth; the bank statement says, “This is what we recorded as happening within your account.”
Church leaders are duty-bound to be interested in the bank’s accounting of the church’s financial activity. Even more importantly, church leaders should be interested in the differences found between the church books and the bank’s books. Those differences may be an important first piece of evidence to the objective truth of what is happening in the church’s finances.
The control that guarantees this “reality check” is the monthly bank reconciliation. Yes, the dull, mundane bank reconciliation is a report of high importance because it certifies the objective truth of what was charged and not charged through the bank’s system.
And even more important than the first step of reconciling the bank statement is taking the second step to look at the reconciling differences between “balance per books” versus “balance per bank”. The differences between what the books say and what the bank says can reveal some interesting information. Consider the following items Wisdom’s accountants discovered when scrutinizing new client’s bank reconciliation reports.
Thousands of dollars of checks that had been written were never cashed. These checks were shown as outstanding checks in the bank reconciliation and would mean the church has far more cash than their books showed. Many states regard this as “abandoned property” and require it to be surrendered to the Secretary of State.
Deposits in the books that the bank never recognized. These items were shown as “deposits in transit” in the bank reconciliation. Either deposits were never received, or these were duplicates in the accounting. Either way the church had far less cash than they once believed.
Automatic checks that the church has stopped paying. There are easy ways in most accounting systems to automatically write utility payments or checks every month to make the bookkeeping easier, but these automatic payments must be addressed if the church stops sending checks, using the service, or when the church changed vendors. If the bookkeeper lets the system keep “issuing” these non-existing checks both the Profit & Loss reports and the cash balance will be incorrect, and the non-existing checks are in the outstanding check list.
Theft may be buried within the bank reconciliation. If manual checks are written by a check signer, and never recorded in the accounting, they will appear as differences between the bank’s accounting and the church’s accounting. This creates the false impression that the church has more cash than the bank indicates. Although, we have found this a more likely case to occur when the bookkeeper is not performing the bank reconciliation at all.
Does anyone ever look at the bank reconciliation report in your church? If no one is, then the church may have lost their point of reference and a crash could take place.
So, what is the answer?
Have someone other than the church bookkeeper reconcile the bank statement monthly– promptly upon the close of a month and prior to monthly financial reports are issued.
Have a church leader review the bank reconciliation along with the bank statement regularly and ask about any unusual or stale items.
Resolve any stale items: issue replacement checks or prove the deposit to the bank so that they post the money to the church’s account.
Wisdom Over Wealth’s service offerings always focus on bank reconciliations. Wisdom always wants our client’s accounting grounded in reality, not suffering from Accounting Vertigo. Check out how Wisdom can partner with your church accounting needs and contact us to help!
