Bank Account Best Practices in D365 Business Central

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I have never been so excited to see an error message from a client. The screenshot they sent me below is very important for 3 reasons that we will explore further below:

  1. Indicates the Bank is linked to a Bank Account Posting Group (good start)
  2. Indicates the GL Account tied to the posting group allows direct posting (not so good)
  3. Warns us that the reconciliation process might become problematic and asks if I want more information (thanks for the warning Microsoft)

The message asks me if I want to learn more - to see the Microsoft Docs click HERE. Otherwise, see the spark notes below.

 

Bank Account linkage to Bank Account Posting Group

This is a great start. As a general rule of thumb in Business Central, every bank account should have a 1 to 1 relationship with a bank account posting group (which should then have a 1 to 1 relationship with a GL Account). In turn this will result in each bank account essentially being linked directly to its subsequent GL Account. In the screenshot below you can see I have 4 unique Bank Account Posting Groups. Can you spot the error? That's right, CASH and OPERATING are both posting to 10300, big no no. In this case we would want to make sure that we have 4 unique groups all pointing to a unique GL Account Number.

By linking each bank account to a posting group with a unique code it will make reconciling your bank at month end much more seamless, ultimately saving you time, and money.

Bank Account Posting Group

This is a good start, but we aren't done yet. Having the posting groups setup correctly is the first step in the right direction, but let's take a closer look at the GL Accounts themselves

 

DO NOT ALLOW DIRECT POSTING ON CASH ACCOUNTS

The all caps may be a little aggressive, but if there is anything we need to pay attention to in this post it is this call to action.

Please, if you only learn one thing today it should be that cash accounts tied to bank accounts should NEVER have direct posting on. By leaving direct posting on you risk users posting directly to the GL Account, without hitting the necessary subledger. We will walk you through an example of that next but first, let's take a look at 3 key fields on the GL Account Card for all bank accounts.

  1. Account Type - This should be posting - not to be confused with direct posting.
  2. Reconciliation Account - This will allow the account to show up in the reconciliation window on general journals
  3. Direct Posting - Have we harped on this enough, please turn this off.

Bank Account GL Account

Bank Reconciliation Issues

Now that we have walked you through why this is so important theoretically, let's put it in practice.

In a simple sense let's say your bank balance and GL balance are both $10,000. With direct posting on you could go into the cash account directly, post a cash receipt for $1,000 (without hitting the bank) and now your GL Balance is $11,000 and you bank balance is still $10,000. In this scenario it is very easy to find where things went wrong, but your organization has more than $10,000 in the bank so digging through all the transactions at month end becomes a nightmare (especially if you have this setup incorrectly for multiple bank accounts).

The solution? Turn Direct Posting Off and make sure there is a 1 to 1 to 1 relationship between GL Accounts, Bank Account Posting Groups, and Bank Accounts so that you never have to worry about this. At the end of the month things should be in sync and it will make your bank reconciliation process much easier, trust me.

 

By Ben Cole at ERP Connect Consulting

2 thoughts on “Bank Account Best Practices in D365 Business Central”

  1. Hi there, is it possible to do the opposite? Meaning, can you tie up more than one GL account to one Bank account? Example:

    Bank Account Posting Group GL
    Cash1 1000
    Cash2 2000

    Could these two GL accounts (and bank account posting groups) tie up to one Bank account? Example:

    Bank Account: GENERAL
    BA Posting Group: Cash1|Cash2

    1. We would not recommend this as the best practice for bank account setup, posting group setup, and GL account tied to the posting group (which is then tied to the bank account) should be a 1 for 1 relationship. Meaning each bank account can only be tied to 1 posting group. And each bank account posting group should only be tied to 1 GL Account. This is not only a setup best practice, but also a Bank Account Reconciliation best practice. We also have a dashboard that is built into D365 Business Central that quickly shows each bank account tie our to ensure your GL Balance ties out to your bank account balance. For more information please feel free to email us at BC@ERPConnectConsulting.com. Thank you.

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