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How to check an AI-built T-12
AI can turn a year of bank statements into a T-12 in minutes. Often it’s close. When it’s wrong, it looks exactly the same. Here is how to check it, in the order that catches the most mistakes for the least effort.
The short version. Don’t ask the AI whether it got it right. Check the T-12 against the bank statements: every statement read, every transaction on the T-12 once, and every transaction on the right line. For why these mistakes happen, see Ten mistakes AI makes in a T-12 from bank statements when nobody checks.
Plan for the time it takes. A year of a property’s statements can hold thousands of transactions, and a wrong one shows a number that looks normal. These ten checks find the worst mistakes, but checking every transaction by hand takes days on each property.
1. Every statement is there, with no gap and no overlap
Line up the statements by date. Each one should begin on the day after the last one ended, and its beginning balance should be the last one’s ending balance, to the cent. A gap means a missing month. An overlap means some transactions may be counted twice.
2. Every statement adds up to the bank’s own balance
For each statement, take the beginning balance, add the deposits the T-12 read, take off the withdrawals, and compare with the ending balance the bank printed. If it’s off, a figure was misread or a transaction was missed. Do this one first: no other check catches a misread figure.
3. Every transaction is on the T-12, once
The deposits and withdrawals on the T-12, including the ones below NOI, should add up to the statements’ totals for the year. If the T-12 has less, transactions were left out. If it has more, some were counted twice.
4. The owner’s money is out of NOI
Find every transfer in from the owner’s other accounts, every contribution and every distribution. None of them is income or an operating expense. They belong below NOI.
5. The loan and the deposits are out of NOI
Find the loan proceeds, the mortgage payments, and the tenants’ security deposits paid in and paid back. None of them is operating income or expense. The mortgage payment belongs in debt service, below NOI.
6. Every check is matched to its payee
A bank statement shows only a check’s number. Take the check register, or the check images, and match every check to who it paid. Then make sure each one is on that payee’s line, not a guess.
7. Every transaction’s line fits its words
Go down the transactions and read each one’s words against the line it’s on. A utility company under rent, a refund under income, a repair under capital work: each moves NOI in a way the bank doesn’t support.
8. One-time items are below NOI
Look for anything that won’t happen again: an insurance payout, a lease buyout, a tax refund, a new roof, the costs of buying or refinancing. Each should sit below NOI on its own line, so NOI shows a normal year.
9. No month stands out without a reason
Read each line across the twelve months. A month far above or below the others is either a real event you can name, or a mistake: a payment counted twice, a month missing, or something on the wrong line.
10. Every figure traces to its transactions
Pick a few cells on the T-12 and find the transactions that make them up. Each figure should be the sum of its transactions, ideally as a formula. A figure you can’t trace is one you can’t defend to a lender or a partner.
A quick checklist
- Every statement is there, with no gap and no overlap.
- Every statement adds up to the bank’s ending balance.
- Every transaction is on the T-12, once.
- The owner’s money is out of NOI.
- The loan and the security deposits are out of NOI.
- Every check is matched to its payee.
- Every transaction’s line fits its words.
- One-time items are below NOI.
- No month stands out without a reason.
- Every figure traces to its transactions.