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History: More than 20 years ago, I was managing a retail pharmacy which started accepting credit cards. We had a bookkeeper that worked a couple days a week and was paid by the hour. I discovered that she was spending a lot of time trying to reconcile batch reports and bank statements. Often the search was for less than $1. I set up an asset account where all credit card activity was posted. Then had the bookkeeper transfer from the new asset account (Funds in Transit) to the bank when the merchant provider posted payment. No more wasted time, no more problem balancing the bank statement. As a bonus, it was easy for me to do a quick audit of activity as well.
Still a Problem: If your bank reconciliation process is a nightmare because online transactions hitting your GL bank account do not match your bank statement, or you need to post some gifts in a batch to multiple GL bank accounts, then you might find this tip helpful.
- Add an asset account to your GL chart of accounts with a description like “Funds In Transit”, or “Deposits in Transit”
- Map all contribution items (i.e. purpose codes, funds, categories, etc.) to the new Funds in Transit account
- As funds actually hit your bank account, simply create a manual journal entry that debits the correct GL bank account and credits the Funds In Transit Account
Rationale: This approach provides a good audit trail for all transactions coming from contribution activity, whether from credit card transactions, ACH transactions, debit card transactions, checks, or cash. You should monitor this account and make sure that it does not grow over time. If that trend does occur, make sure that all received funds are actually hitting your bank account. A good audit trail is important.