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TVET PROGRAM TITLE: Accounts and Budget Support Level

IIIMODULE TITLE: Administering Financial AccountsLEARNING OUTCOMES:

At the end of this module the trainer will be able to

LEARNING OUTCOMES:

At the end of this module the trainer will be able to

LO1:

Allocate customer payments

LO2:

Reconcile accounts

LO3

: Maintain customer details

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Contents

LO1: Review accounts receivable process....................................................................................................

3Accounting Processes & Procedures.........................................................................................................
3Transaction process control standards ......................................................................................................
7LO2: Reconcile accounts .........................................................................................................................
14Reconciliation .........................................................................................................................................
14What is meant by reconciling an account? ..............................................................................................
16Reconciliation of Balance Sheet Accounts .............................................................................................
16Budget Reconciliation .............................................................................................................................
18LO3: Maintain customer details ...............................................................................................................
21Maintaining Customer Accounts ............................................................................................................
21Customer accounts ..................................................................................................................................
22Sending account invites to customers .....................................................................................................
22Managing Customer Accounts ................................................................................................................
23Creating a Customer
Account ....................................................................................................................... 23Customer Account
Settings ..................................................................................................................... 235 Ways to Maintain
Clean and Accurate Customer Information ............................................................ 24Give Your Customers
Payment Options ................................................................................................. 25

LO1: Review accounts receivable process

Accounting Processes & Procedures

Accounting is a technical business function responsible for recording, reporting and analyzingfinancial
information. Small business owners use accounting to determine the profitability oftheir company &
rsquo;s operations. As small businesses continue to grow and expand,accounting processes and
procedures may be needed to maintain the company’s financialinformation. Accounting
processes and procedures are usually based on the basic accountingcycle. The accounting process
outlines how financial information flows through a company andwhich individuals are responsible the
information.

Identify Transactions

Identifying transactions or other financial events is the beginning of the accounting cycle.Business
owners use written documents to track specific information relating to financialtransactions. These
documents classify transactions and usually include specific informationregarding economic events.
Business owners also use this information to have a historical recordof business transactions. Once each
transaction is identified and classified, the information isrecorded in the company & rsquo;s general
ledger.

Record Transactions

Recording transactions is the physical process of entering financial data into the company’s
general ledger. Small businesses may use manual or automated accounting ledgers intheir business
operations. Manual accounting requires business owners to maintain several paperledgers for recording
financial transactions. Accounting software provides business owners withan electronic process for
recording transactions and maintaining financial information.Recording transactions may require
business owners to prepare journal entries based on financialtransaction documents.

Prepare Reports and Statements

The final output of the accounting cycle is the preparation of financial reports and statements.These
reports and statements provide business owners with information regarding the efficiencyand
profitability of business operations. Business owners often use information to makedecisions on
improving operational performance. Business owners can also use this informationto secure external
financing for growing and expanding their company.

Handling Procedures

Accounting procedures usually dictate which individuals are responsible for financial oraccounting
information. Smaller or home-based businesses do not usually require these procedures. Larger business
organizations may employ several individuals to handle financialinformation and move it through the
accounting cycle. Handling procedures outline who isresponsible for gathering financial data and how
the information will be entered into the generalledger.

Reconciliation Procedures

Reconciliation procedures ensure all financial information is properly recorded in a company ’s
accounting ledger. Business owners may also require reconciliations when reviewinginternal financial
information against vendor invoices, bank statements or other externaldocuments. Reconciliation
procedures ensure all business or financial information is correct andfinancial reports include accurate
and valid information.

Review Procedures

Review procedures are an important part of the accounting process. Business owners implementthese
procedures to ensure financial information prepared by employees is correct. Largerorganizations with
accounting departments commonly use a controller or accounting supervisorto review an employee &
rsquo;s work. This review process may discover errors and requirechanges prior to releasing financial
information to business owners.

Financial Transaction Control Procedures Guide

What is a financial control?

A financial transaction control is a procedure that is intended to detect and/or prevent

errors,misappropriations, or policy non-compliance in a financial transaction process.


Control procedures help an organization achieve its mission and strategic objectives byensuring
resources are effectively collected and used, and accurately accounted for.

A control procedure may be performed by either an individual or as part of an automated process within
a financial system.

A control procedure is effective only if there is adequate separation of duties betweenindividuals

performing the different control responsibilities in the process.

For more information about separation of duties, refer to the “

UnderstandingSeparation of Duties Guide

.”

An individual usually receives a formal delegation of authority to perform a transaction process control
procedure and, upon successful completion of the procedure, is expectedto document his or her
accountability.

This is usually done by indicating approval through a signature on a form or anon-line approval captured
in an automated financial system. For more information

5
about financial accountability, refer to the “

Understanding FinancialAccountability Guide."

Financial transaction process stages

A specific financial process may be composed of some or all of the following activities,or stages:

TransactionProcess StageDescription Examples

Entity set-upreview andapproval *Setup of basic vendor, customer, oremployee information in a

financialsystem and verification (review) of

the data’s accuracy.

Customer, vendor, or employee accountset-up, which includes account numberassignment, contact,

and other information.Transactionreview andapproval. **Review and approval of atransaction. This may
occur at morethan one stage of a financial process.Purchase requisition approval; Cruzbuyrequisition
approval; cash receipt formapproval; time report approval; transfer ofexpense
approval.TransactionverificationVerification of payment being madeor of goods or services
beingreceived.Goods receipt confirmation; manualsignature on check payments.Post-transactionreport
review **Verification of transactionsappearing in a ledger, subledger, andother report, such as an edit
orexception report.General ledger transaction review;distribution of payroll expense review;transaction
exception report review.Reconciliation * Balance comparison between ledgerand an independent data
source.Bank account reconciliation; accountsreceivable reconciliation.

Balance analysis Review of ratios, trends, or year-to-year comparisons to identify potential

errors.Comparison of monthly expenditures with

prior years’ amounts; comparison of

expenditures to budget.


* This process stage usually applies only to a central campus office

** Typically a key stage of the process.

Transaction process risks

At each stage of a financial process, there are one or more risks that could prevent the process from
completing successfully.

Risk Examples

1. Error in accountingclassificationIncorrect input of organization, fund, or account code assigned to

atransaction; critical accounting coding data omitted2. Number or arithmeticerrorInput of incorrect
amount; arithmetic or numerical transpositionerror3. Unintentional assetmisdirection errorGood sent to
wrong place because of the input of an incorrectaddress; excess financial aid check sent to wrong
address because ofincorrect student account data4. Misappropriation Pocketing cash receipt;
unauthorized issuance of parking passes; purchase of equipment or other goods or services for personal
use5. Fraud Falsifying accounting records or data; entering into unauthorizedagreements in the name of
the University6. Regulatory, Failing to comply with a policy requirement; failing to fulfill the

contractual, or policynon-complianceterms of a contract

Transaction process control standards

The goal of a well-managed financial transaction process is to ensure that each completedtransaction
complies with all of the following seven transaction control standards applicable tothe process:


Appropriate:

The transaction is directly related to achieving the mission of theUniversity.

Valid:

The transaction is allowed by policy, law, contractual agreement, and/or professional standards.

Reasonable:

The amount being paid for a product or service, or received in payment fora product or service is fair.

Funded:

For payment transactions, sufficient funding exists to pay for the transaction.

Accurately recorded:

The transaction amount is consistent with value received, provided, or adjusted for; and is free from
accounting coding or arithmetic error.

Supportable:

The amount being paid or received for a good or service, or the amount ofan adjustment is consistent
with supporting documentation, standard, situation, or practice.


Timely recorded:

The date associated with the transaction is accurate.

Types of financial controls

To manage the risk of a financial transaction processing failure, manual and/or automated control
procedures are implemented at key stages of the process.

Manual Transaction Controls

Control Procedure Type Examples

1. Transaction initiation review andapproval

Review and approval of expense reimbursement request

Review and approval of a CruzBuy requisition

Review and approval of a transfer of expenditure

Review and acceptance of a sponsored award contract

Review and approval of a recharge


Review and approval of Financial Information System,Payroll Personnel, CruzBuy system user access
forms

2. Asset receipt verification

Review and approval of a receiving report3. Post-transaction review

Review and certification of transactions appearing in thegeneral ledger

Review and certification of monthly Purchasing Cardtransaction reports

Review and certification of Distribution of Payroll Expensereports

Review and certification of Financial Information System orData Warehouse transaction edit (suspicious
transactions) orexception (error) reports4. Balance reconciliation

Monthly reconciliation and certification of summarizedaccounts receivable ledger balance to detailed

debtor accounts balances listing


Monthly or quarterly petty cash account reconciliation andcertification5. Balance analysis

Review and approval of entertainment expenses for unusualfluctuations in the balance over the course
of a year

Analysis and certification of material budget to actual expensedifferences

Automated Transaction Controls

Control Procedure Type Examples

1. System access functions

Financial Information System password access requirement2. Data input

Date or telephone number format checking3. Data validation

Organization, fund, and/or account code validation4. Data processing

Automatic summarization and posting of invoice payment data to the

9

general ledger

Control procedure strength levels

Important information to know:The strength, or level of reliance, placed on a financial control procedure
in managing risksdepends on three key factors:

Control quality objectives of the control procedure;

Skills, qualifications, and accountability of the individual assigned to perform the procedure; and

Adequacy of separation of duties within the process.

Procedure ControlStrengthTypical AttributesProcedure Control Quality ObjectiveStaff Skills

andQualificationsSeparation ofDuties

Strong Complete, thorough transaction review Strong knowledge andanalytical skills,

andexperienceAdequateModerate Complete, but cursory; or limitedscope, but thorough transaction
reviewSomewhat knowledgeableand experienced, withadequate analytical skillsAdequateWeak Cursory
and/or limited scopetransaction reviewMinimal knowledge,experience and/oranalytical
skillsInadequateA well-managed organization deploys a mix of strong, moderate, and weak control
procedures atdifferent stages of a financial process in the most cost effective way.

Strong controls, relied upon heavily to manage risks, tend to cost more to maintain.


A strong control is typically implemented at the point or points in a financial processwhere the
maximum number of risks can be managed, which enables using weaker,usually less costly controls, at
other points in the process.

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