Accounting Best Practices, Fifth Edition

6–4. Consolidate Bank Accounts

A time-consuming chore at the beginning of each month is to complete reconciliations between the bank statements for all the company’s bank accounts and the book balances it maintains for each of those accounts. For example, a retail store operation may have a separate bank account for each of hundreds of locations, each of which must be reconciled. Also, if it is the controller’s policy to wait for all bank accounts to be reconciled before issuing financial statements, this can be the primary bottleneck operation of the monthly close. Finally, having many bank accounts raises the possibility that cash will linger in all of those accounts, resulting in less total cash being available for investment purposes. To use the previous example, if there are 100 retail stores and each has a bank account in which is deposited $5,000 (a decidedly modest sum for a single location), then $500,000 has been rendered unavailable for investment. Thus, having a multitude of bank accounts leads to a variety of downstream problems, which can seriously impact the efficiency of some portions of the accounting department, while also reducing the amount of cash readily available for investment purposes.

The best solution is to merge as many of them together as possible. To use the previous example, rather than give a bank account to each store, it may be possible to issue ...