What to do if a payment is made from the "wrong" bank account

Understanding what funds are is really important for all churches and charities. If this isn't something you are super confident with, then we'd recommend taking a moment to check out this blog article - What is Fund Accounting for Charities?

So that is funds, what about bank accounts? A bank account is a place where financial transactions take place and where money is held. Whilst you may wish to have more than one bank account (e.g. you may choose to open a savings account to get a better rate of interest on some of your charity's money), you definitely don't need to open a bank account for each fund - your accounting software keeps track of which transactions relate to each fund, and what your fund balances are.

Here are some of the common misconceptions that charities sometimes have about bank accounts:

• That bank accounts and funds are linked (they are not!)
• That each fund needs its own bank account (this is typically not the case!)
• That the bank account money is paid from affects your financial reports (it doesn't!)
• That transfers between banks are needed where money has been paid from the "wrong" bank account (again, this isn't the case)

Does the bank account actually matter?

In fund accounting, it isn't actually important which bank account a payment is made from.

For example, if a £10 expenditure is recorded to an expenditure category within your 'Foodbank Fund', the foodbank fund balance will correctly reduce by £10 regardless which bank account the money is paid out from. It's a common accounting misconception among churches and charities that they need to:

• a) have a separate bank account for each restricted or designated fund and
• b) have to try and keep the bank balances of such bank accounts aligned with the already correct fund balances within your financial reports (you don't!)

To read a blog that explains this futher click here.

How do I bank match the transaction?

When bank matching the outgoing bank transaction to the payee or supplier, within the Match Transactions screen, you should match this in the usual way:

• select the transaction on the left-hand table
• when it matches to the corresponding payment on the right-hand table, click confirm.

Do I need to transfer money between bank accounts?

As explained above, in fund accounting, it isn't actually important which bank account a payment is made from.

Therefore you do not need to transfer money between bank accounts.

If you do decide to move money between bank accounts, see this for guidance on how to record a transfer between bank accounts in ExpensePlus.

To better understand the Bank Reconciliation module, please view the module overview video here.