Guides

Post inter account transfers from imported bank statements

Inter account transfers can be confusing when importing bank statements. The confusion typically arises because an inter account transfer is really two separate transactions:

  • A withdrawal from the source account (a payment)
  • A deposit to the destination account (a receipt)

When a transfer is recorded in Manager’s Inter Account Transfers tab, the program combines the two transactions on a single entry screen, then invisibly records them to their separate bank accounts. But when transactions are imported via an electronic bank statement, the imported statement includes only one or the other transaction, never both.

Moreover, whether posting any bank transaction to an account manually or by bank rule, receipts and payments cannot be posted to Cash at bank and a specific bank account. (Without explaining all the details here, that would result in duplication of transactions.) Therefore, receipts and payments that are part of an inter account transfer must be processed via a clearing account.

Note
Clearing accounts are used to temporarily lodge transactions that will eventually be posted to regular accounts. Amounts are debited and credited in offset to one another, sometimes almost simultaneously, but other times days apart, after some aspect of a transaction is cleared or appears on a statement. Normally, the debits and credits cancel each other, so the balance of the clearing account returns to zero when all activity is complete. Using a clearing account is like temporarily storing cash in your pocket until you can transfer it to your wallet.

Set up the clearing account

Theoretically, since the net effect of an inter account transfer leaves the clearing account with a zero (or undisturbed prior) balance, any account could be used. But that would temporarily distort the balance of the selected account until the transaction fully clears.

Likewise, if a clearing account exists for some other purpose, it could be used. But good accounting practice uses separate clearing accounts for different purposes so their histories show distinct types of transactions.

The imported statement entry relating to transfers between financial accounts needs to be processed with a Bank Rule via a clearing account. (Or edit the entry to the clearing account)

Under Chart of Accounts in the Settings tab, add the clearing account. Assign it to the Assets group on the balance sheet.

Note
Technically, the clearing account could also be assigned to the Liabilities group. The choice makes no long-term accounting difference. However, since a transfer deposit cannot clear before the corresponding transfer withdrawal, funds posted to the clearing account while in transit are better thought of as assets than liabilities.

Example
Brilliant Industries imports bank transactions, including inter account transfers between its various banks. It adds a new account to its chart of accounts:

47%20AM

The clearing account appears on the balance sheet:

54%20AM

Use the clearing account

When importing bank statements, post all transactions related to inter account transfers to the same clearing account. Withdrawals from a source account increase the balance of the clearing account.

Example
Brilliant transfers 7,500 from its checking account to a dedicated payroll account. It imports the statement for the checking account and categorizes the withdrawal to Transfer clearing. On the balance sheet, Cash at bank declines, and Transfer clearing increases by the same amount:

26%20AM

Deposits to a destination account decrease the balance of the clearing account.

Example
Brilliant downloads and imports a statement for the payroll account. It categorizes the incoming receipt for the transfer to Transfer clearing. Cash at bank increases and Transfer clearing declines to zero. The balance sheet now looks the same as before the transfer:

55%20AM

Methods for categorizing transactions

As with any other imported bank transaction, inter account transfer elements can be categorized by either of two methods:

  • Manual: During the import process, click Edit next to the receipt or payment. Select the clearing account and click Update.
  • Bank rule: Click New Bank Rule and define a bank rule that will recognize future transfer receipts and/or payments. Exact definition of the bank rule will depend on the format and terminology used by your financial institution on its statements. Be careful to choose criteria that are common to all transfer transactions rather than unique to one. You may need to define separate rules for withdrawals and deposits, but only if terminology used is different. Manager is able to distinguish between withdrawals and deposits (payments and receipts) when importing and will treat the transactions correctly.

Example
Looking at past statements from its main checking account bank, Brilliant discovers that outgoing transfers to its payroll bank are always described as “XFER TO FIRST GENERAL BANK” plus various other data. Likewise, statements for the payroll account always note “INCOMING CONSOLIDATED BANK.” It creates two bank rules to handle transfers of payroll funds between its accounts at the two banks:

28%20AM

and

46%20AM

Caution
You should use the Inter Account Transfers tab or import bank statements in the Bank Accounts tab, but not both. Using both will result in duplication of transfers. Correction of duplicates requires deleting either (a) the inter account transfer entry or (b) both the corresponding payment and receipt from imports from the two banks.

If you want to enter transfers in the Inter Account Transfers tab, yet import statements to capture other transactions, click Edit, then Delete for transfer payments and receipts during the import process.

Support
Subscribe to Updates

Subscribe to our newsletter and get exclusive product updates you won't find anywhere else straight to your inbox.

Manager is rated 5 out of 5 by 33 reviewers
© 2018 - Based in Sydney, Australia but providing goodness globally