How is your general ledger reconciliation going…?

Some utilities wait for their annual audit to be complete and then adjust their accounts receivable based on the auditor’s adjusting entries. Their general ledger accounts receivable balances then remain static for the next twelve months until they repeat the process.

Does this describe your utility? Or have you tried and not succeeded at reconciling with the general ledger? In either case, this issue should prove helpful as we examine how to reconcile with the general ledger.

Does your billing software interface with your general ledger?

If the answer to this first question is “No”, it might be time for you to consider new billing software. In today’s market, any reputable billing software should be capable of interfacing to a general ledger system, regardless of whether the general ledger software is from the same vendor or a third party system.

How often are you updating the general ledger?

Assuming that your billing system does interface with your general ledger, are you updating the general ledger daily? If not, then you are not taking full advantage of the general ledger interface and you can’t rely on your account balances to be correct. Cash and accounts receivable accounts will have incorrect balances if payments are not updated to the general ledger daily.

Does your general ledger include multiple utility receivable accounts?

Does your general ledger contain more than one utility accounts receivable account? For example, do you track water and sewer receivables to different accounts? Or do you bill for services that are accounted for in different funds, such as water and electric? If you do, does your billing software provide a report that details how much is outstanding by service, corresponding to each receivable account? If the answer to this last question is “No”, please refer back to the first section above.

Are you reconciling on a regular basis?

For those who aren’t accountants, how about a brief review of Accounting 101? A subsidiary ledger contains detailed transactions that aren’t posted directly to the general ledger. A control account is a summary level account in the general ledger that contains totals for transactions that are stored in a subsidiary ledger. The individual customer balances in your utility billing system represent the subsidiary ledger, while the corresponding accounts receivable account in the general ledger serves as the control account.

Are you reconciling the balances in the utility billing system with the corresponding accounts receivable account in the general ledger, at least monthly? If not, I encourage you to start doing so and make the reconciliation part of your regular month-end process.

If you’re not reconciling, are you wondering how to get started?

To start the process of reconciling with the general ledger, you need to pick a starting point. The first of a month is an ideal time to start. You will need to establish the beginning balance by running an outstanding accounts receivable report from your billing software. If your billing system has an aged trial balance, this is an excellent report to use. If you will be reconciling to multiple accounts receivable accounts, you will need to run the report from your billing software that gives the total owed by service.

Once you establish the beginning balance, you will need to adjust the receivable account(s) in the general ledger so that they agree with the subsidiary ledger(s). I know – you don’t want to adjust the accounts receivable in the general ledger, especially if it has to be reduced, but this is the only way that you will be able to reconcile.

Generally, receivables are affected by three types of utility billing transactions:

  • Billings and charges increase receivables
  • Payments decrease receivables
  • Adjustments increase or decrease receivables, depending on the type of adjustment

Each time you update billings, payments, adjustments or any other type of transaction in your billing system that impacts accounts receivable, be sure that the corresponding journal entries are updated in the general ledger.

After all transactions for the day are updated in your billing system and in the general ledger, run the appropriate reports from your billing system and compare the outstanding balances with the corresponding accounts receivable accounts in the general ledger. If the amounts are in agreement, everything with your general ledger interface is set up correctly and your work for today is done. If the amounts do not agree, you will need to research the amount that is out of balance and determine which source transactions equal that amount. You will need to correct the general ledger interface setup, enter an adjusting journal entry and start the process over again tomorrow.

As you are getting started, why go through this process every day?

I realize that it probably seems excessive to start out doing this process daily, but it should take no more than 10 or 15 minutes, depending on the number of accounts and speed of your software. By reconciling daily, you restrict the potential out of balance transactions to one day’s activity, making it easier to find the amount that the reconciliation is out of balance. Continue repeating this process daily until you feel confident that you have all of your general ledger interfaces defined correctly. Over the course of a month you should have processed every type of transaction.

Once you have reached this level of confidence, you can discontinue the daily process and make the reconciliation part of your month-end routine.

If you have any questions about general ledger interfaces or reconciling with the general ledger, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders

Are you following these meter reading best practices?

Many utilities are moving to automated meter reading systems such as drive-by and fixed base reading, but most still use handheld meter reading devices. If your utility is still using handhelds, this issue will examine some best practices for meter reading.

A common complaint of customers is, “You don’t read my meter every month.”  What you, as a manager, are faced with is determining if this is reality or perception. Technology such as automated meter reading, and even handhelds, has made “shade tree reading” more difficult to accomplish successfully. Even with handhelds, you still want to insure that you get accurate meter readings each month and eliminate the possibility of your meter readers fabricating readings.

Adhering to the following best practices will insure that.

Rotate routes among meter readers

If you have more than one meter reader, it’s a good idea to rotate reading routes among them. This serves multiple purposes. Your meter readers become familiar with all of your routes, which is helpful in case of absences due to vacation, sickness, or if staff turnover occurs. Rotating routes also makes it less likely that a dishonest meter reader can accurately make up a reading by remembering past usage patterns.

Read all meters every month

Do you read all meters every month, even for inactive accounts?  If your answer is, “No”, I encourage you to start now. Reading meters for inactive accounts is the best way to detect someone moving into a vacant house and using utilities without properly applying for service. For water meters, it is also a way to determine if these is a leak at a vacant property.

Don’t display previous readings in the handheld

If you’ve been in this business as long as I have, you can remember the days when meter readers carried meter books. Each account had a page in the meter book and the meter reader would write each reading in the book. Generally, each page in the meter book contained one or two years of monthly readings.

Do you remember how much the meter readers complained when you took away the meter books and made them use handhelds?  That’s because they no longer had the meter book and its wealth of information at their fingertips!

The advantage of meter books was that the meter reader had easy access to each account’s usage history. The disadvantage of meter books also was that the meter reader had easy access to each account’s usage history. Having access to an account’s past usage history made it easier for dishonest meter readers to engage in “shade tree reading”.

For the same reason, I recommend not displaying previous readings in the handheld, if that option exists. Eliminating the possibility of using the previous reading to guesstimate a meter reading is the best way to insure that the meter reader actually reads each meter.

Set reasonable high/low limits

Do your meter readers complain that the handheld beeps at them for high and low readings all the time?  Is this really the case or do they just not want to be bothered with entering an out of range reading a second time?  If it really is the case, then you likely don’t have good high/low limits set when you export the handheld file from your billing software. Establishing high/low limits is not an exact science and it can require multiple tweaks and adjustments until you arrive at limits that catch readings that are legitimately high or low.

Seasonally adjust high/low limits

Most customers have usage patterns that vary seasonally. For water, this is usually seen in increased usage in the summer when watering lawns and gardens causes usage to increase. For electricity utilities, the pattern is often increased usage in the winter and summer when customers are heating and cooling their homes. Do you seasonally adjust your high/low parameters to mirror your customer’s usage patterns? If not, you may not be taking full advantage of using the high/low alerts generated by the meter reading devices.

Following these best practices will insure that every meter is read each billing period. By doing this, you will have taken steps to catch out of range readings in the field, reducing the number of re-reads.  Minimizing the number of re-reads each billing period reduces costs and expedites the billing process. Also, insuring that accurate meter readings are taken each month is critical to your utility’s credibility with your customers.

If you have questions about meter reading practices or would like information about moving to an automated meter reading system, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2011 Gary Sanders