Are you reconciling deposits…?

Over a year ago, I wrote about accounts receivable general ledger reconciliation. This issue examines a similar process – reconciling security deposits.

Security deposits should be reconciled with the general ledger just as your accounts receivable is.

Deposit bank accounts

Many utilities keep security deposits in a separate bank account from the operating cash account. This makes reconciling deposits easier, but doesn’t do away with the need to do so.

If you don’t maintain a separate bank account for deposits, it’s especially important to insure that deposits are reconciled.

Does your billing software interface with your general ledger?

As mentioned in the issue regarding reconciling the general ledger, in today’s market any reputable billing software should be capable of interfacing to a general ledger system. So, if yours isn’t, it might be time to consider new billing software.

General ledger entries for deposits

Even if your software doesn’t interface with the general ledger, you should still enter manual journal entries to complete the process.

A few issues back dealt with improving the process for applying deposits. That issue included a link to a T-account illustration detailing each step in the process, if you missed it.

The deposit reconciliation process

The key to reconciling deposits is to insure that the balance of the customer deposit general ledger account(s) (the control account) agrees with the detail report(s) of deposits from your billing system (the subsidiary ledger).

If you maintain a separate cash account for deposits, the balance of this bank account should also agree with the control account and subsidiary ledger.

This reconciliation should take place regularly, at least monthly.

If I’m not reconciling, how do I get started?

Much like the process of general ledger reconciliation, reconciling deposits involves running the necessary report(s) from your billing system and comparing the totals to the deposit account(s) in the general ledger.

If the amounts agree, your work is done. If they don’t agree, you will need to research the difference, correct the general ledger interface setup, enter an adjusting journal entry and repeat the process tomorrow.

Initially, I recommend repeating this process daily. That way, if you are out of balance, you only have one day’s work to look through to find the difference. Once you are confident that everything is set up correctly and the process is working flawlessly, you can discontinue the daily process and make it 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

Click here to subscribe to my free e-mail newsletter

© 2013 Gary Sanders

How do you compare?

Last week, in one of the listservs I subscribe to, a question was posed about the percentage of accounts that are paid on time vs. late vs. actually cut-off.

Thinking about the question, I realized two previous issues, about cut-off policies and late fees, have dealt with the results of a Delinquent Accounts Study I conducted for the 2010 Logics User Meeting.

But one topic from that study I haven’t written about is the percentage of accounts that were assessed a late penalty or cut off for non-payment.

Percentage of accounts charged a late fee

Of the 51 study respondents whose data was analyzed, the percentage of accounts assessed a late fee ranged from 2.15% to 37.91%, as shown in the graph below (clicking on the graph will open a larger image):

Percentage of Accounts Charged Late Fee

Percentage of accounts charged cut-off fee

Only 41 of the customers who participated in the study charge the cut-off fee to every account when the cut-off list leaves the office. Of those 41 customers, data from 36 was analyzed and the percentage of accounts charged a cut-off fee ranged from .37% to 7.85%, as depicted by this graph:

Percentage of Accounts Charged Cut-Off Fee

What are acceptable ranges?

Based on the results of the study and personal experience, below are the general rules of thumb that I follow for acceptable ranges of delinquent accounts:

Accounts assessed a late fee:

  • < 15% – Excellent
  • 15-25% – Normal range
  • > 25% – Room for improvement

Accounts cut off for non-payment:

  • < 2% – Excellent
  • 2-3% – Normal range
  • > 3% – Room for improvement

These percentages are influenced by a number of factors, including:

Use as a benchmark for self-improvement

The percentages above are general guidelines and can vary widely from utility to utility. If your percentages are higher than you would like them to be, don’t panic.

Rather than comparing your utility to other utilities, why not use your current percentage as a benchmark to improve upon?

Need help improving your delinquency rates?

If you would like assistance determining how to improve your delinquency rates, give me a call at 919-232-2320 or e-mail me at I would welcome the opportunity to discuss how a business review could benefit your utility.

Click here to subscribe to my free e-mail newsletter

© 2013 Gary Sanders