Check monthly account statements

September 2015

In this article we would like to emphasise the importance to check (control) all the monthly account statements you receive.

Let us first of all clarify the term statements. Unfortunately the term “statements” could be a bit confusing. In a previous article we used the term in relation to financial statements being balance sheets, income statement and a cash-flow statement. In this article we are also using the term “statements” but now in relation to monthly statements being for example, bank statements, account statements from other service providers (agricultural companies), cell phone contract statements, Eskom statements, Telkom statements, perhaps statements from a municipality, or from your medical aid scheme, and so forth. Should you do business with these service providers and pay them on a monthly basis or even over a longer period these service providers must provide you with an account statement at the end of each month.

The question arises what to do with these statements? Throw them in “File 13” as we say or throw them away? No, you must use them – check them regularly that they are correct. Please note mistakes do occur occasionally. Your money is involved and you could be paying too much which will then negatively affect your finances.

Remember throughout our series of articles on management one of the principles we have emphasised is that everything and everybody involved with the farming, be it the owner/manager or employees, does or do not do when necessary, affects the profit/loss of the business. And we have also emphasised if you cannot do something yourself you must get someone to do it for you. Maybe someone in the family or somebody from outside such as your bookkeeper – refer to a previous article regarding financial statements.

How to check the account statements you receive

First of all you need all the so-called source documents for all transactions related to your business where money is involved (directly or indirectly). In all instances a source document will be a piece of paper, such as bank statements, bank- and deposit slips, purchase invoices (including till slips, cash slips, petrol slips), sales invoices and delivery documents and so forth. By now you should realise that these source documents are very, very important to the management of your business.

Secondly, it is very helpful to set up your own accounts in your own record system either manually or by computer. Then use the source documents to keep the account of each service provider up to date.

Thirdly, on receipt of the official account statements compare the statements with your own records with reference to:

• Have all purchases been recorded correctly in terms of the product, item, service and especially the amount? Should you find a discrepancy refer back to your source documents (helpful if you have filed all source documents in orderly manner).
• Have all payments been recorded correctly?
• Have all sales (deliveries) been recorded correctly?
• Have all returns been recorded correctly?

Then reconcile the account statements with your own records. Should there be a difference follow it up with the specific service provider as soon as possible to rectify. You will notice that many service providers indicate on these statements a time frame for you to follow up on differences. If you do not follow up any discrepancy within the time frame, it will be assumed that the statement is correct.

You will realise by now that to do this properly you will have to record other information such as the usage of electricity, deliveries made for instance of your diesel and other items. Admittedly to record some information such as phone calls is more difficult, but with a little bit of extra effort information can be acquired.

As already indicated discrepancies may occur even with our technically advanced systems of today. Fortunately it does not normally occur each and every month but it does occur occasionally. Be on the lookout especially when a service provider “improves” their systems or changes to a new system. Systems are developed and implemented and maintained by people who can make mistakes, it is not the system as such.

An example from personal experience – at the end of January 2015 on receipt of the monthly account statement from our medical scheme it was determined that a claim for medicines acquired during January 2015 to the amount of R463,36 was duplicated. If this was not followed up it would have been our loss.

However, despite the importance of the control of monthly account statements it is actually amazing to experience that not many people do it. In conclusion, the principle of checking all monthly account statements is just as applicable for your business as for your private accounts. It can only be to your advantage.

Article submitted by Marius Greyling, Pula Imvula contributor.
For more information, send an email to mariusg@mcgacc.co.za.

Publication: September 2015

Section: Pula/Imvula