applied epic bookkeeping

It’s month end and time to run your month end accounting balancing reports and financial statements. You review your balance sheet and income statement and one or more of your general ledger account balances looks incorrect…what do you do? How do you know if the general ledger account balances are correct? Where do you even start with how to research and make corrections?

This is a task that many agencies face every month or when the time comes to send your financial statements to your CPA. This can be a very overwhelming and time-consuming task but learning strategies about where to look and how to make those corrections will empower you with the tools necessary to analyze and ensure that your GL balances are accurate. Most of the time, it is your Cash, Receivables, Cash on Account, and Payables balances that can become incorrect and figuring out why can be like finding a needle in a haystack.

Time to put on your analytical hat and perform your General Ledger Account Reconciliations! This important process will help ensure the accuracy and integrity of your agency’s financial statements. It is equally important as reconciling your commissions, producer payables, and bank statements.

Getting Started Performing General Ledger Account Reconciliations

1. Obtain a good understanding of your accounting configuration in Epic.

Is your agency set up as Cash or Accrual for Agency Bill and Direct Bill Income? How do you post Direct Bill Commissions and how are your Producers and Brokers paid? This configuration is what sets the “behind the scenes” entries for Epic to calculate and post policy transactions.

2. Run your Balance Sheet to include sub-accounts.

Make sure you select to run this report as “Open” through your current month or the month you are researching. Balance sheet accounts roll from year to year so you always must start with your beginning month in Epic. On this report, you can view your receivable and payable accounts by sub-account and look for balances that look incorrect. Balances with negatives or that are uncharacteristically large or small are good places to start. Assets (Cash, Receivables, Cash on Account, and Fixed Assets) are natural debit balances and Liabilities (Vendor/Company/Broker/Producer payables and Debt payables) are natural credit balances. If you see negatives in these general ledger accounts, start there.

3. Run your Income Statement to include sub-accounts.

Also in this report, balances with negatives or that are uncharacteristically large or small are good places to start. Income accounts are natural credits and Expense accounts are natural debits. If you see negatives in these balances, it indicates that perhaps a Receipt or a Disbursement was entered incorrectly. Missing commissions could mean that receipts and reconciliations have not been completed, depending on your accounting configuration.

4. Run a Status of Accounts Report for the general ledger accounts that look incorrect on your Balance Sheet and Income Statement.

This report contains information about every transaction that is posted to these general ledger accounts. Here you will find line-item details about the Receipts (R), Disbursements (D), Journal Entries (J), System Generated Journal Entries (MJE), and Voided Entries (DV, RV). Each one of these entries has a reference number that you can look up in Receipts, Disbursements, and Journal Entries to review and make sure they were entered correctly. Journal Entries (J) are always a good place to start since they are manually created debits and credits to GL accounts, and it is easy to select the wrong GL account or enter incorrectly.

5. Reconcile your bank accounts in Epic every month.

This will catch missing or incorrectly entered Receipts and Disbursements in your cash accounts in Epic. Every entry that is posted in your bank accounts must also be entered into Epic as a Receipt or a Disbursement. Think of it as a mirroring process. If you are struggling to balance your bank reconciliation, use your Status of Accounts report to help identify debits and credits in your cash accounts that may need correcting. Reconciling your bank accounts in Epic every month ensures the accuracy of your cash account balances on your balance sheet.

6. Find duplicate, missing, or incorrect entries in the Status of Accounts Report.

In the Status of Accounts Report, you can find duplicate entries or perhaps if an entry was entered backwards (entered as a debit instead of a credit or vice-versa) or not at all. If you receipt commissions to Cash on Account or Direct Bill Commission Receivable instead of directly to Commission Income, the Status of Accounts report is a great place to review the Receipts (which are credits to the asset account) and make sure that you see the offsetting MJE that moves the commission from the Balance Sheet to the Income Statement (which are debits to the asset account). They should offset each other to zero and if you have a balance in this account at month end, it can indicate that the Direct Bill Commission Reconciliation has not been completed and/or associated to the Receipt for that accounting month.

7. Correct your entries and re-run the reports.

Once you identify errors, the accounting team can make the correcting entries and re-run the reports to make sure the general ledger balances now look correct on your financial statements. Making this GL Account Reconciliation analysis part of your month end accounting process will help your agency stay on top of making sure your financial statements are accurate and will prevent having to spend countless hours and days at year end having to go back to find and correct errors in previous months. If there are consistent GL account errors happening, you need to review your agency’s accounting and servicing workflows to make sure transactions are being entered and reconciled correctly.

How KiteTech can help

Performing these General Ledger Account Reconciliations in Epic is an important step in your month end closing process but can be an overwhelming and time-consuming task. If you find that your agency is struggling with understanding and ensuring the accuracy of your month end accounting reports and financial statements, the KiteTech Agency Consulting team is here to help! We have extensive experience in Applied Epic accounting, and we are ready to provide customized solutions that meet your agency’s unique needs. We can assist your agency with accounting optimization, forensic accounting and cleanup, as well as Outsourced Bookkeeping Services. Contact us today for more information!