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Take a penny / Leave a penny - At the Office

Save time searching for tiny accounting imbalances
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Background: In many convenience stores, there's a bowl of pennies near the cash register, and if the customer is short a penny, they can draw a penny from the bowl and call it even. This saves the store and the customer time.

I suggest this be adopted in insurance, banking and other financial businesses as well (whether customer money is directly involved or not). Very often, when trying to reconcile two files or balance an account, it turns out to be off by a tiny amount like $20.00, out of millions of dollars. Sometimes tens of thousands of dollars worth of person hours are then spent trying to track down the missing few dollars and analyze whether it's due to rounding or some other event. I say save the time and money, and whenever a discrepancy of a small amount is found, allow the *option* of the accountants/actuaries responsible for reconciliation, to contribute $20.00 *from their own pockets* into a special "Reconciliation Imbalance Fund", to be held in a special trust fund at the company.

Note that, no matter what the direction of the imbalance, be it too low or too high, the *absolute value* must be contributed to the trust fund. This ensures the trust fund will always be (more than) sufficient to pay all unfunded liabilities that are later discovered.

Then a special "imbalance adjustment" (fudge factor) is added to the account ledger and the account is deemed balanced.

Over time, the trust fund will grow. If, at any point, it is determined that a customer or creditor (e.g. a real person) is owed money that is unavailable from the paying account, then and only then can the trust be drawn from.

When dollar amounts get too large, e.g. in the hundreds of dollars, chances are the accountants won't feel like contributing the money, and only then will those thousands of dollars and person-hours be spent trying to resolve the discrepancy.

Thank you.

phundug, Dec 16 2008

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       Petty cash?
phoenix, Dec 16 2008
  

       Those thousands of man-hours are well spent: A $20 difference could result from an improper $10,020 credit and two improper $5,000 debits. You never know until the books are balanced, and balanced right.
Voice, Dec 17 2008
  

       mostly what [zen-tom] said.   

       Besides, an experienced auditor (i r 1) can usually pinpoint the cause of an imbalance within seconds.
FlyingToaster, Dec 17 2008
  

       The real answer is to reconcile more frequently. This is starting to happen in some companies - bank accounts electronically interface with modern accounting systems and the speed of computing means that imbalances can be flagged within milliseconds of them being caused. In fact, in many cases accounting systems will refuse to accept entries with even a 0.0001% imbalance.
vincevincevince, Dec 18 2008
  
      
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