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Hands up everyone who gets to the month end reconciliation pack, all's going well until......... you review the unreconciled items report and identify a number of cheques drawn on client account are over 6 months old.
Know that feeling?
In a recent poll conducted by BlueSky Legal Finance Solutions 10% of voters identified that they had unreconciled cheques over 12 months old! Whilst it can be a thankless task having to deal with unreconciled cheques, ultimately it will save time when dealing with the month end compliance pack review and any awkward questions if your Reporting Accountants identify them.
The most popular response with almost 2/3 of those who responded had unreconciled cheques less than 3 months old, followed by less than 6 months old.
This shows that there are firms which take this matter seriously and have excellent controls in place.
If you have unreconciled cheques over 12 months old its time to get on top of them. Close attention should be taken with any cheques over 6 months old.
Here are our suggestions on how you can keep on top of these cheques to make sure they don’t cause you a headache later.
After one to two months review large value cheques and contact the recipients to confirm they have received the cheque. It maybe the cheque has been lost in the post. Check their address details before reissuing any cheques.
After 4 to 5 months contact all recipients to confirm they have received the cheque and will bank it before it becomes six months old.
When a cheque becomes 6 months old, stop the cheque with your bank.
Communicate with the recipient to confirm the best method for issuing a new payment, is it a replacement cheque or an electronic payment.
Banks make best efforts not to process cheques when they are six months old, so it’s not fool proof. Make sure you stop any cheques which haven’t been presented when they are 6 months old. If you are issuing a replacement regardless of age, make sure a stop is placed on it with your bank. But remember some banks will charge for placing a stop on a cheque.
If you have unreconciled cheques over 6 months old then urgent attention should be placed on these. It’s quite possible these cheques could actually be masking a surplus client balance and with the debt not being extinguished, you should contact the recipient urgently.
It will be much easier to attempt to contact some clients within a couple of months of the transaction taking place. As time goes on there are chances the client could move, change email address or other contact details. When communicating with clients make sure you are using their most up to date address. If the matter you were instructed on was a property sale or purchase make sure the address is up dated to reflect their last move. You would be amazed at the number of firms who still use the clients last address, even though they dealt with the sale of that property for the client. If you feel you could do with a helping hand to sort any unreconciled cheques or aged client balances, or even how we might be able to help you introduce processes to remove the need for issuing cheques, then please do get in touch.