change cleared balance?
3 posts
• Page 1 of 1
change cleared balance?
by JenM » Wed Mar 17, 2010 2:37 pm
I'm pretty sure I have a handle on how YNAB works now, having been working with it for a few weeks. But I'm having a hard time with the "cleared balance" and the numbers from my credit union. I know they are supposed to match up, but mine are about $750 off, and not in my favor. I know I can change the working balance number, but that's not really going to solve the problem, which is YNAB and my bank have entirely different opinions of how much I have available? How can I fix this? This is the last little thing (that I know of) that is holding me back and it's driving me insane. Any help would be hugely appreciated, thanks!
- JenM
- Posts: 11
- Joined: Wed Mar 10, 2010 2:22 pm
Re: change cleared balance?
by chrish » Wed Mar 17, 2010 4:14 pm
Search for 'patzer's formula' in the forums. You will first need to balance your accounts to the bank, then balance your budget to your accounts.
Chris
- chrish
- Posts: 2046
- Joined: Fri Feb 13, 2009 1:22 pm
Re: change cleared balance?
by Patzer » Wed Mar 17, 2010 7:26 pm
Balancing the budget to the account is described in this thread, but I don't think that's what the original question was about.
If I understand this correctly, you have an issue with reconciling your YNAB accounts to your credit union statement. In its current incarnation, YNAB does not have direct software support for reconciliation. Because of this, we need to manually re-create what a reconciliation wizard would do. This is no big deal for someone who understands the theory of account reconciliation, and a learning process for someone who does not yet understand the reconciliation process. There are two implied questions here: 1. How do I reconcile, starting from never having reconciled before? and, 2. How do I reconcile regularly?
Traditionally, reconciliation was done monthly using monthly statements. With the advent of online account access, we are no longer tied to monthly statements. Reconciliation can be done any time, on the fly, to the balance as the bank or credit union knows it right now. But to reconcile without the benefit of a reconciliation wizard, we need to understand what we're doing.
Reconciliation is the process of identifying what transactions the bank knows about, what transactions the account holder knows about that are not yet reflected in the bank statement or online balance, and correcting any discrepancies. The basic process of how to reconcile is traditionally printed on the back of checking account statements, but the process can be applied to savings accounts and credit card accounts as well as checking accounts. My credit union's version of reconciliation looks like:
Ending balance on statement
+ deposits not yet credited
- checks and other debits outstanding
------------------------------------------
Balance (should agree with the balance in your checkbook)
What does that mean in YNAB terms?
"Ending balance on statement" is the balance you are reconciling to. That could be a statement balance, or it could be the current balance reported by your bank with online access. "Deposits not yet credited" are any inflows to the account that you know you have made but are not reflected on the statement or are not yet posted to the online balance you are working with. "Checks and other debits outstanding" are any outflows you know you have made that are not reflected on the statement or are not yet posted to the online balance you are working with. It is very common that the bank will know about all the inflows you have made, but outflows can be outstanding.
What YNAB shows you at the bottom of the register is:
Cleared balance + Uncleared Transactions = Working Balance
In reconciliation theory, "Cleared Balance" should equal the bank balance (from the statement or online information, while "Uncleared Transactions" should be the net of deposits not credited and checks and other debits outstanding. Uncleared Transactions will frequently be a negative number. "Working Balance" is what your account balance will be when all the transactions the bank doesn't know about yet catch up.
The important concept for software reconciliation is, how do you get the cleared balance to match the bank balance? Behind the scenes, YNAB computes the cleared balance as the net of all the transactions that have a green "C" indicator in the cleared column. When you undertake your first reconciliation, you mark every transaction that is already reflected in your bank statement or online bank balance with a green C, and make sure than no transactions that the bank doesn't know about yet have that green C. If everything is accurate, your cleared balance will match the bank balance at this point. You are now reconciled.
So what do you do if you've marked everything that the bank knows about with a green C, and the cleared balance doesn't match the bank balance? You look for errors. An error might be that you recorded a transaction for a different amount than the bank did, or that you failed to record a transaction that the bank shows, or that you cleared a transaction that the bank doesn't know about yet, or that you failed to clear a transaction that the bank does know about, or that you recorded a transaction in the wrong account. You take corrective action depending on the nature of the mistake you found. In many cases, this will simply mean changing your records to agree with the bank. In some cases, it may mean you need to call the bank about a mistake they made. ("Hello, Citi MasterCard? You show two charges at Wegman's for $11.33 on X date. I did indeed charge $11.33 of groceries on that date, but I didn't do so twice. One of those charges is in error.")
Now, it may be a noticeable effort to reconcile the first time. You dig through all your historical transactions and figure out which should be cleared and which should not. Once you get that done, you don't want to go to that much effort again. Fortunately, if you stay on top of things you don't have to. Here's my method:
1. As soon as my cleared balance matches my bank balance, I mark all of the cleared transactions with a blue flag. (The color is arbitrary.)
2. The next time I go to reconcile my accounts, I know that all of the transactions with a blue flag have been previously reconciled. I only need to work with the transactions that have no flag. If I have trouble getting the cleared balance to match the bank balance, and I suspect I might have cleared a transaction in error, I only need to look through the transactions with no flag for which one it might be. That limits how many transactions I need to work with to achieve balance.
3. Once I achieve a balance, I put blue flags on the newly cleared transactions, to prepare for the next time I will reconcile.
In reconciliation wizard terms, no flag and uncleared = uncleared, no flag and cleared = cleared, blue flag and cleared = reconciled.
Someday, when and if Jesse implements a reconciliation wizard, much of this will be taken care of behind the scenes by the wizard. You'll start the reconciliation wizard, tell it what the bank balance is, and mark transactions cleared or uncleared from the list of unreconciled transactions the wizard will show you. When the unreconciled balance gets to zero, you'll tell the wizard that you are done. The wizard will then mark all the newly cleared transactions as reconciled, and you'll be done until the next time you reconcile. But until Jesse decides to add that type of software support for reconciliation, we need to reconcile the manual way. It's a few more keystrokes and mouse clicks, and a somewhat more effort keeping track of what's previously reconciled so we know what transactions we need to work with, but it can be done.
Now, someone is sure to pipe in that they have no trouble with the two-stage cleared and uncleared states, because they check their online balance every few days and there's not much work to be done. I find this to be true for the majority of my accounts. However, it is not true for the most active of my accounts. In my main checking account and my most frequently used credit card account, I can have a lot of transactions that the bank doesn't know about yet. This is the type of situation that really needs reconciliation. My savings accounts work just fine with 2-stage clearing, where I look at the online balance, find the line with the running balance that matches the bank, and clear all the transactions up to and including that line. Simple, easy, and not sufficient for an account with 12 or 20 transactions of various dates that are not yet reflected in the bank balance.
Patzer
JenM wrote:I'm having a hard time with the "cleared balance" and the numbers from my credit union. I know they are supposed to match up, but mine are about $750 off, and not in my favor.
If I understand this correctly, you have an issue with reconciling your YNAB accounts to your credit union statement. In its current incarnation, YNAB does not have direct software support for reconciliation. Because of this, we need to manually re-create what a reconciliation wizard would do. This is no big deal for someone who understands the theory of account reconciliation, and a learning process for someone who does not yet understand the reconciliation process. There are two implied questions here: 1. How do I reconcile, starting from never having reconciled before? and, 2. How do I reconcile regularly?
Traditionally, reconciliation was done monthly using monthly statements. With the advent of online account access, we are no longer tied to monthly statements. Reconciliation can be done any time, on the fly, to the balance as the bank or credit union knows it right now. But to reconcile without the benefit of a reconciliation wizard, we need to understand what we're doing.
Reconciliation is the process of identifying what transactions the bank knows about, what transactions the account holder knows about that are not yet reflected in the bank statement or online balance, and correcting any discrepancies. The basic process of how to reconcile is traditionally printed on the back of checking account statements, but the process can be applied to savings accounts and credit card accounts as well as checking accounts. My credit union's version of reconciliation looks like:
Ending balance on statement
+ deposits not yet credited
- checks and other debits outstanding
------------------------------------------
Balance (should agree with the balance in your checkbook)
What does that mean in YNAB terms?
"Ending balance on statement" is the balance you are reconciling to. That could be a statement balance, or it could be the current balance reported by your bank with online access. "Deposits not yet credited" are any inflows to the account that you know you have made but are not reflected on the statement or are not yet posted to the online balance you are working with. "Checks and other debits outstanding" are any outflows you know you have made that are not reflected on the statement or are not yet posted to the online balance you are working with. It is very common that the bank will know about all the inflows you have made, but outflows can be outstanding.
What YNAB shows you at the bottom of the register is:
Cleared balance + Uncleared Transactions = Working Balance
In reconciliation theory, "Cleared Balance" should equal the bank balance (from the statement or online information, while "Uncleared Transactions" should be the net of deposits not credited and checks and other debits outstanding. Uncleared Transactions will frequently be a negative number. "Working Balance" is what your account balance will be when all the transactions the bank doesn't know about yet catch up.
The important concept for software reconciliation is, how do you get the cleared balance to match the bank balance? Behind the scenes, YNAB computes the cleared balance as the net of all the transactions that have a green "C" indicator in the cleared column. When you undertake your first reconciliation, you mark every transaction that is already reflected in your bank statement or online bank balance with a green C, and make sure than no transactions that the bank doesn't know about yet have that green C. If everything is accurate, your cleared balance will match the bank balance at this point. You are now reconciled.
So what do you do if you've marked everything that the bank knows about with a green C, and the cleared balance doesn't match the bank balance? You look for errors. An error might be that you recorded a transaction for a different amount than the bank did, or that you failed to record a transaction that the bank shows, or that you cleared a transaction that the bank doesn't know about yet, or that you failed to clear a transaction that the bank does know about, or that you recorded a transaction in the wrong account. You take corrective action depending on the nature of the mistake you found. In many cases, this will simply mean changing your records to agree with the bank. In some cases, it may mean you need to call the bank about a mistake they made. ("Hello, Citi MasterCard? You show two charges at Wegman's for $11.33 on X date. I did indeed charge $11.33 of groceries on that date, but I didn't do so twice. One of those charges is in error.")
Now, it may be a noticeable effort to reconcile the first time. You dig through all your historical transactions and figure out which should be cleared and which should not. Once you get that done, you don't want to go to that much effort again. Fortunately, if you stay on top of things you don't have to. Here's my method:
1. As soon as my cleared balance matches my bank balance, I mark all of the cleared transactions with a blue flag. (The color is arbitrary.)
2. The next time I go to reconcile my accounts, I know that all of the transactions with a blue flag have been previously reconciled. I only need to work with the transactions that have no flag. If I have trouble getting the cleared balance to match the bank balance, and I suspect I might have cleared a transaction in error, I only need to look through the transactions with no flag for which one it might be. That limits how many transactions I need to work with to achieve balance.
3. Once I achieve a balance, I put blue flags on the newly cleared transactions, to prepare for the next time I will reconcile.
In reconciliation wizard terms, no flag and uncleared = uncleared, no flag and cleared = cleared, blue flag and cleared = reconciled.
Someday, when and if Jesse implements a reconciliation wizard, much of this will be taken care of behind the scenes by the wizard. You'll start the reconciliation wizard, tell it what the bank balance is, and mark transactions cleared or uncleared from the list of unreconciled transactions the wizard will show you. When the unreconciled balance gets to zero, you'll tell the wizard that you are done. The wizard will then mark all the newly cleared transactions as reconciled, and you'll be done until the next time you reconcile. But until Jesse decides to add that type of software support for reconciliation, we need to reconcile the manual way. It's a few more keystrokes and mouse clicks, and a somewhat more effort keeping track of what's previously reconciled so we know what transactions we need to work with, but it can be done.
Now, someone is sure to pipe in that they have no trouble with the two-stage cleared and uncleared states, because they check their online balance every few days and there's not much work to be done. I find this to be true for the majority of my accounts. However, it is not true for the most active of my accounts. In my main checking account and my most frequently used credit card account, I can have a lot of transactions that the bank doesn't know about yet. This is the type of situation that really needs reconciliation. My savings accounts work just fine with 2-stage clearing, where I look at the online balance, find the line with the running balance that matches the bank, and clear all the transactions up to and including that line. Simple, easy, and not sufficient for an account with 12 or 20 transactions of various dates that are not yet reflected in the bank balance.
Patzer
- Patzer
- Posts: 3204
- Joined: Fri Dec 28, 2007 6:52 pm
- Location: Rochester, NY
3 posts
• Page 1 of 1
