What are transaction errors and how do they impact reconciliation?

Errors play a role in line 1 of the reconciliation formula. More specifically, a withrawal made in error increases the Reconciled Balance (the amount you actually have in your bank, after adjustments) in line 1 of the reconciliation formula. This is on the basis of the assumption that the error will be corrected in due course, which would result in increasing the balance of the bank account. On the other hand, a deposit made in error reduces the Reconciled Balance. This is on the basis of the assumption that the error will be corrected in due course, which would result in reducing the balance of the bank. 

You should note that Nojumi distinguishes between errors in 3 different ways:

1. Interanal Errors vs. Bank Errors

2. Errors connected to a matter vs. Errors not connected to a matter
3. Errors connected to a bank feed transaction vs. Errors not connected to a bank feed transaction

It's important to understand the difference between these types of errors and how they impact reconciliation.

Errors that are connected to a matter vs. Errors that are not connected to a matter

An error, whether an internal error or a bank error, may or may not be connected to a matter. When an error is connected to a matter, it will be reflected in the balance of the matter in the trust listing report. When a withdrawal that is connected to a matter is marked as an error, on the trust listing report, the matter is shown to have a balance equal to the balance on the matter transactions page plus the amount of the error. On the other hand, when a deposit that is connected to a matter is marked as an error, on the trust listing report, the matter is shown to have a balance equal to the balance on the matter transactions page, less the amount of the error. In other words, the trust listing report shows how much a client is supposed to have in the absence of errors.

To correct an error that is connected to a matter, you should take the following steps:

1. Complete a transaction in the bank that corrects this error. When the matter has been overdrawn as a result of the error, this would typically be a transfer from your general account to the trust account.

2. Record the transaction in step 1 on the matter transactions page. After this step, the balance shown on the matter transactions page should no longer show the error.

3. On the reconciliation page for the month of error, click on the Errors tab, select the error on the left, and click on the Record correction button at the top

4. In the modal that appears, select the date for the correction, add a description for the correction, and click on Record correction

Once the above steps are taken, the error will no longer show in the reconciliation report after the date of the correction.

Errors connected to a bank feed transaction vs. Errors not connected to a bank feed transaction

Errors that are connected to a bank feed transaction are those that have been created on the bank feed page. On the bank feed, you can click on the Actions button next to any transaction and mark it as an error. This will result in creating an error that is connected to a bank feed transaction.

Errors that are connected to a bank feed transaction can only be connected through a correction that is also on the bank feed. You can add a correction for an error that is connected to a bank feed transaction in two ways:

Method 1: Correction from the bank feed page

1. On the bank feed, locate the transaction that represents the correction and click on the Actions button and select Make Bank Error Correction.

2. A list of the errors that are connected to the bank feed will show. Select the errors that the correction is meant to correct and click on Make bank error correction. Note that the correction amount must be equal to the total of the errors that you select.

Method 2: Correction from the reconciliation page

1. On the reconciliation page, click on the Errors tab

2. Select the errors that you wish to correct
3. Select the bank feed transaction that is meant to correct the errors and clickon Record correction

Internal Errors vs. Bank Errors

Internal errors are transaction errors that are caused by the law firm staff where as bank errors are errors that are caused by the bank. 

Internal errors and bank errors are treated similarly in Nojumi for reconciliation purposes (i.e. they both impact the reconciliation formula in the same way). Their only difference is the party responsible for the error. We distinguish between bank errors and internal errors to allow you to see what errors are caused by the bank and which are caused by you and your staff.

An example of an internal error is a cheque that is drawn in the amount of $1,000, when it was meant to be drawn in the amount of $100 (i.e. when you prepared the cheque you put an extra 0 in the amount field). Bank errors, on the other hand, are errors that are caused by the bank. An example of a bank errorr are banking charges that are in error posted to the trust account by the bank, such as a $1.50 charge posted to the trust account when you send an e-transfer from trust.