Coding Your Cheque Stubs

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There are two main reasons why businesses today should care about the proper coding of cheque stubs, before giving them to the accountant or bookkeeper for input and preparation of the monthly financial statements …

* (1) Because your accountant or bookkeeper was not present when you issued the cheque, it makes sense to put as much detail on the cheque as possible to describe why you issued the cheque .. instead of letting them guess what it is for

* (2) Accountants and bookkeepers charge you by the hour … if you can reduce the time they spend inputting your information, then you will be charged less and your costs will be reduced .. and phone calls to the cheque writer asking “what is this cheque for” counts

I have taken one of my cheque stubs out and filled out a sample of the wrong way to code a cheque, and the right way to code a cheque. In each instance, the example uses a fictitious company with a GST input tax credit amount included. I also included the PST paid in the cheque, and both PST and GST is based on 7%. There might be a phony bill somewhere with a purchase of $346.89 plus $24.28 PST plus $24.28 GST.

WRONG WAY

* The bookkeeper has to manually take a calculator to figure out what the expense is (cheque amount less GST)
* The cheque stub does not tell what the payment was for
* The cheque stuff lists the invoice number, as if the bookkeeper will go to your filing system, and look up the details him/herself .. If you are using your cheque stubs as a control for your Accounts Payable, you probably need a better system in place (like two file folders – one for paid bills and one for unpaid bills)

Note: It is good to mark the actual invoice with the cheque number, date of payment and amount of payment, and sometimes good to know how the payment was delivered, mailed, courier etc.

RIGHT WAY

* Notice that the expense amount WAS calculated (cheque amount less GST) .. this speeds up input for your bookkeeper
* Notice that the cheque stub indicates what expense account it is for (R & M, or repairs and maintenance). Alternatively, if the writer has a chart of accounts – you can place the G/L account code here
* Notice that despite the above two, the writer of the cheque STILL describes what the payment was for. This is useful, because even though the writer might believe this to be R&M, your accountant now has enough information to agree or perhaps code it somewhere else .. (maybe in this case, warehouse renovations or maybe even to capitalize the amounts).

Also note – payments to the same supplier or business can definately be for two or many different reasons (e.g., the $371.17 could have been broken down into warehouse renovations, janitor supplies, office furniture, etc) .. so if that was the case, break down the details on the back of the cheque stub and just mark “Over –>” on the face of the cheque stub and take as much space as you need. If you need even more – take a loose leaf paper if you have to and just staple it to that cheque stub.

It’s not that hard as it sounds .. to do this as you write the cheques, and your bookkeeper and accountant will be happier!

Comments

fran says:

This post made me laugh- I waste so much time chasing up what the cheque was for which account to debit…

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