Solving NetSuite Bank Reconciliations Differences to Balance Sheet

This article is relevant if you are having trouble reconciling your NetSuite cash accounts to bank statements.

Background

NetSuite offers good bank reconciliation features. ¬†It’s understood that a good period close practice to help produce reliable financial statements is to produce a bank reconciliation and explain all differences. ¬†When producing a bank account reconciliation, you typically¬†will face a phenomenon representing two classes of “unknowns” that occur between two parties: you and the bank. ¬†These two classes are generally explained as follows:

  1. What transactions have you created that the bank does not yet know.
  2. What transactions has the bank recorded or produced that you have not booked.

In general, when performing a NetSuite based bank reconciliation, you will record all the transactions that are of the second variety: namely, all bank related transactions that you did not know about should get booked (category number two above). ¬†For those balances that are left to explain, many accountants will record them against a “suspense” or “unexplained” account to ensure they stand out during any financial statement review. ¬†These balances will be worked to drive them to zero by re-classing them once you gain a real understanding of their nature.

Knowing your Bank Reconciliation is Complete

When you finish performing your bank reconciliation, it is advised that you check the balance of the general ledger account representing the bank account as of the date of the reconciliation.  The balance should be equal to the total of the report which is the difference between the bank statement ending balance and all the transactions that the bank does not know about (category number one above).
But what if there are differences between the general ledger balance and the ending balance on the reconciliation report?

Solving NetSuite Out of Bank Reconciliation Balance Issues

Recently, I was stumped by a problem during a bank reconciliation that did not fit neatly into the two categories discussed above. ¬†I trusted I reconciled the bank statement correctly and I trusted the general ledger account balance. ¬†Yet, the reconciliation report did not tie to the general ledger. ¬†What?! ¬†I had a problem transaction on the reconciliation report that indicated it was “uncleared”, yet I knew that the balance was effectively already accounted for.

Given I have the pleasure of being both an accountant and a software architect, I felt that the report was technically incorrect. I trusted my Balance Sheet but I did not trust this Reconciliation Report — I could explain how it was not to be trusted. ¬†Indeed, I could almost see the technical problem in the report but it was not at all obvious how to solve it.

NetSuite Reconciliation Features and Cleared Transactions

NetSuite has a couple of mechanisms to mark transactions cleared and reconciled. ¬†It’s possible that you may mark a transaction cleared by touching it on the check register versus marking it cleared during ¬†a bank reconciliation. ¬†For what ever reason, things can get out of sync between your reconciliation report and the underlying transactional balance rollup.

To solve for this, you need to actually go to the General Ledger Register and “unclear” the related transactions. ¬†Then, you need to go to the oldest bank reconciliation (previously thought complete) with the problem transaction and “clean it up”. ¬†This may mean reconciling the bank statement again. ¬† You then need to walk forward in time and perform effectively the same function on any connected transactions. ¬†Ultimately, you should get to the place where you “true up” the general ledger account balance with the ending bank reconciliation report balance — as expected.

Keep your Books Clean

In general, I recommend keeping your books clean from the start and don’t let a mess build up. ¬†It’s always more costly to solve a problem tomorrow than it is today as you have to “gear up” and try to remember what all the issues where when you sit down to work. ¬†System related issues can especially tricky — don’t give up! ¬†Rest better when you know the world is in order and information is trustworthy.

If you are having challenges getting NetSuite to perform to your satisfaction, contact us.  We excel at optimizing NetSuite and can help.

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Marty Zigman

Holding all three official certifications, Marty is Southern California's NetSuite expert and leads a team of senior professionals at Prolecto Resources, Inc. He is a former Deloitte & Touche CPA and has held CTO roles. For over 25 years, Marty has produced leadership in ERP, CRM and eCommerce business systems. Contact Marty to setup a conversation.

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| Tags: , , , , | Category: Accounting, NetSuite, Reporting | 6 Comments

5 Comments

  1. Posted March 5, 2014 at 4:00 am | Permalink

    Great article, Marty! The types of bank reconciliation issues you talk about do play a big part in whether the balance sheet and other reporting is accurate. Another issue we find is that once a reconciliation is done, if the period is not closed out, transactions can be edited and can “un-reconcile” the bank account. Under the Reconcile Bank Statement screen is a History button, and clicking that button and dating the report back in time, will show if there are any Differences in any of the reconciliations, and if so, those should be reviewed and re-reconciled too.

  2. Posted March 5, 2014 at 11:04 am | Permalink

    Thank you Barry,

    Great helpful follow up. This is one of many reasons to close the books to prevent transactions from modifying.

    I also find that getting the previous Bank Reconciliation to come up for edit is not intuitive. I usually run the Bank Reconciliation report to see the dates of the previous reconciliation efforts. Then, I take one of those dates and supply it to the Bank Reconciliation “Statement End Date” to bring up the previous work so I can refine and move forward.

  3. Posted March 6, 2014 at 4:59 pm | Permalink

    Informative.

  4. Posted October 15, 2014 at 4:23 am | Permalink

    Marty,

    If we have a variance in our bank reconciliation in one month (ie hit the bank but not the GL), does that variance carry over into the next month’s rec? Or, is each month’s bank rec just for that month’s activity?

    Thank you.

    Jim

  5. Posted October 16, 2014 at 12:33 pm | Permalink

    Hello Jim,

    My experience shows that a variance will continue into the next month until it finally is in sync with your NetSuite Records. But I want to make sure I understand you correctly. Typically, it is the other way around.

    1. The bank may not know all the activities you generated. That is normal as checks may be out in the world still waiting to clear.

    2. Any bank things that come over during your reconciliation that you did not know should be booked in NetSuite. At that point, they are known. Even if you have to book them as “Suspense”, they at least are known.

    Hence the only variances I expect are things that bank doesn’t know. Yet, you said “hit the bank but not the GL” as a variance. I expect no variances if you perform step #2. Perhaps you can clarify to help me understand better.

    Marty

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