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Background: In many convenience stores, there's a bowl of pennies near the cash register, and if the customer is short a penny, they can draw a penny from the bowl and call it even. This saves the store and the customer time.
I suggest this be adopted in insurance, banking and other financial businesses
as well (whether customer money is directly involved or not). Very often, when trying to reconcile two files or balance an account, it turns out to be off by a tiny amount like $20.00, out of millions of dollars. Sometimes tens of thousands of dollars worth of person hours are then spent trying to track down the missing few dollars and analyze whether it's due to rounding or some other event. I say save the time and money, and whenever a discrepancy of a small amount is found, allow the *option* of the accountants/actuaries responsible for reconciliation, to contribute $20.00 *from their own pockets* into a special "Reconciliation Imbalance Fund", to be held in a special trust fund at the company.
Note that, no matter what the direction of the imbalance, be it too low or too high, the *absolute value* must be contributed to the trust fund. This ensures the trust fund will always be (more than) sufficient to pay all unfunded liabilities that are later discovered.
Then a special "imbalance adjustment" (fudge factor) is added to the account ledger and the account is deemed balanced.
Over time, the trust fund will grow. If, at any point, it is determined that a customer or creditor (e.g. a real person) is owed money that is unavailable from the paying account, then and only then can the trust be drawn from.
When dollar amounts get too large, e.g. in the hundreds of dollars, chances are the accountants won't feel like contributing the money, and only then will those thousands of dollars and person-hours be spent trying to resolve the discrepancy.
Thank you.
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Annotation:
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As [Phoenix] alludes - this is already done (although not out of employee's pockets) quite extensively in fact - although there remain differing schools of thought as to whether it's an appropriate thing to do. |
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On one hand, being able to rely on a world where everything is always exactly correct actually helps when you're searching for an anomalous figure. It's relatively easy to search for an amount of 12,345.67 in a database, and only have a couple of hits, whereas searching for a common figure e.g. 5,000 500,000 or 5,000,000 might return multiple potential candidates for investigation. Since money is, by its very definition, fungible - one 50,000 is very much the same as another - the only thing that matters is in terms of ownership, and if that's what you're trying to ascertain, it's useful to have some clues. Normally, there are references and account numbers to look at, but sometimes, there's nothing except a big unexplained wad of numerical cash floating about and nobody knows who's it is - meanwhile, that someone is getting really angry at the other end of a closed and faceless bureaucracy, wanting to know where his 50 large has gone. |
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A useful trick when making payments to large financial organisations is to make them non-'round' amounts - If I pay my credit card £500.55, it's much less likely to get lost in the wash. Kind of a numerical, computerised version of Emil's Pinprick. |
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If you live in a laissez-faire world of gain a penny lose a penny, and people start realising that and getting sloppy with their payments, you'd need to rely on an alternate method of identifying what money belongs where (which is an awful lot harder than it sounds) |
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In some organisations, there's a distinct client/broker accountancy split - with strict limits placed on client-side data and a looser, more expedient approach adopted within the safety of the organisation - this works reasonably well, saves traders from getting penny-based coronaries, and results in quite large 'pots' getting written off at the end of the year - and we're talking 10's or 100's of thousands here. |
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Making the employees pay for accounting errors seems like either a scam, or an opportunity for one - if I had to choose between saving (my employer's) time or paying £20 of my own cash, you can bet I'm going to spend all day looking for that lost £20. This might have the effect of encouraging all employees to be more diligent, which might be the counter-intuitive goal of the idea? |
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Those thousands of man-hours are well spent: A $20 difference could result from an improper $10,020 credit and two improper $5,000 debits. You never know until the books are balanced, and balanced right. |
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mostly what [zen-tom] said. |
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Besides, an experienced auditor (i r 1) can usually pinpoint the cause of an imbalance within seconds. |
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The real answer is to reconcile more frequently. This is starting to happen in some companies - bank accounts electronically interface with modern accounting systems and the speed of computing means that imbalances can be flagged within milliseconds of them being caused. In fact, in many cases accounting systems will refuse to accept entries with even a 0.0001% imbalance. |
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