There are 5 steps to completing a month end review and bank reconciliation.
1. Complete the bank reconciliation report in Xero.
2. Run the Subledger report in Loft.
3. Check that they match.
4. On your monthly balance sheet double check that the Trust bank = Trust liability and if you're running a commission clearing account you will compare the Commission bank = Commission payable account.
5. Tips for unbalanced banks and liabilities. Remember - when the transaction is fully closed there should be no funds held in the liability accounts :)
- Bank Reconciliations in Xero
Xero makes use of thousands of bank feeds to make the reconciliation process easier. Loft will generate and post journal entries for your Real Estate accounting activity so your Escrow and Commission Accounts should be very easy to reconcile. You should not have to post any manual journals if you are correctly posting entries to your transactions in Loft.
Once you have completed a bank reconciliation for the month you can click on the three dots and select Reconciliation Report. I'm going to use Dec 31st as my example.
Change the date to the last day of the month you are reporting for and note the Balance in Xero. This example has no outstanding payments or receipts so the statement balance equals the book balance.
2. Run the subledger in Loft
Under the Reports menu scroll down to Subledger, select the bank account you're reconciling and the date of the reconciliation. If you'd like to keep a record of this you can print this page to PDF.
3. Compare this subledger balance with the Balance in Xero from Step one. In both these cases the total is $4500.
4. Review the liability accounts (trust funds held or commission payable) to the subledger account. Ideally these are all exactly the same dollar value.
Pull a Balance sheet report and compare the bank balance and liability balance.
Tips for subledger accounts out of balance!
If your liability accounts are not lining up with the subledger you can export all the transactions from your liability account. Look for items that have not been posted from Loft.
There should be no manually created transactions in these accounts.
If no transactions pop out then you can simply compare using deal numbers and descriptions. All credits should be offset with debits to the liability account upon paying out an agent.
Download the subledger for the last date that it was reconciled. You now have a list of all deals that are holding funds. You can then download or just review the transactions from the Account Transaction report for the month in Xero. All deposits being held have a credit balance so any funds released from the account should see an offsetting debit to reduce the balance for the deal to $0. Unfortunately, if there were any manual entries, bills voided or removed from Xero it may take reviewing each deal one at a time to ensure Loft and Xero are holding the same information.
If you are audited annually it is a good idea to have a managing Broker sign off or initial the Reconciliation report once you've confirmed that the subledger is a match.
Happy Reconciling :)