The reason why an entrepreneur should do a bank reconciliation any time they are about to disburse money in their business says Edmonton bookkeeping, is because it will show them an accurate reflection of the money that they have in their business that they can use. One mistake that entrepreneurs often make, especially when their new business is that they are reviewing their bank balances in order to see how much money they have to use. The reason why this is an accurate is that if business owners have cash disbursements that are scheduled to come out or have written checks that have not cleared yet, it will look like they have more money in their bank account to use than they actually do. For example, if a business owner has written a five thousand dollars check on Monday and they check their bank balance on Wednesday to see if they can take a dividend, they may end up taking money out of their bank account and triggering that check to bounce.

With how important making the right financial decision is in business, entrepreneurs should do everything that they can in order to improve their financial decisions. 50% of all entrepreneurs in Canada fail before their fifth year in business, and 29% of those entrepreneurs say the reason why their business failed was that they ran out of money. Business owners can significantly avoid this if they are prudent in checking how much money they actually have in their business before making financial decisions.

When entrepreneurs are doing their bank reconciliation, they will be starting with the balance that of money that they had in their business the previous time period, and entering in all of the transactions they should have in their business since the last reconciliation. This should include everything going into or out of their business bank account as well as all checks that they have written over the past time period as well. Once they are finished entering all of the information into their report, business owners should review a very important aspect of the report called the uncleared balances. Edmonton bookkeeping says that what this is is a record of all of the payments that have made but have not yet cleared the bank account. This will show up if a business owner has written a check but it has not been cashed yet. This can also show up if a business owner is waiting for a debit transaction to clear, or a credit card payment to populate. For the most part, business owners should expect that uncleared balances can show up on statements for a couple of days. If they see these uncleared balances on previous statements, this should trigger business owners to check to ensure it is not an error.

If these uncleared balances are checks that entrepreneurs have written, and they have verified that there are no errors says Edmonton bookkeeping, business owners should call the person who has the check and asked them if they have received it. Checks get stale dated at six months which means they are unusable, and business owners should check in with who has the check before then to see if they received it and if they have, to remind them to cash it.

When new business owners are learning how to run their business, Edmonton bookkeeping says that a very important step in the learning process is getting into the habit of doing bank reconciliations before they make any payments. The reason why this is important is that a bank reconciliation can be a powerful tool for helping a business owner know if they have money in their business and whether they can disburse payments or not.

If business owners get into the habit of reviewing this information before they make any payments, they can be confident that they will never make financial decisions that will cause them to run out of money in their business. By using technology, business owners can significantly help the process of reconciling their bank accounts. QuickBooks Online has a feature that allows entrepreneurs to connect the software with their bank account so that every time a transaction happens in their bank accounts, it appears in QuickBooks Online. Even though this automated system can make things much easier and accurate, it should not ever replace and entrepreneurs need to verify the information. They will be saving a significant amount of

time, so they can use some of that time that they save to verify the information in the software. Edmonton bookkeeping says that this is important to get into the habit of doing because it is not just important that entrepreneurs are doing bank reconciliations, but they need to be able to do those bank reconciliations correctly and accurately.

In order to start bank reconciliations properly, business owners need to verify that they are starting exactly where the last one left off. If they are not doing this, they will start their reconciliation already out, and it will not balance at the end. If the two totals do not match, a business owner should go back and redo the bank reconciliation. If additional transactions came through after an entrepreneur’s last reconciliation, it could cause the totals to be slightly out. Business owners should eliminate that possibility and do another reconciliation to ensure that their current report will be as error-free as possible.

By learning how to do bank reconciliations as well as doing them properly, and often, business owners can ensure that they are setting their business up for success and never causing their business to run out of money due to making wrong financial decisions in their business. Edmonton bookkeeping says that this is an extremely important habit to get into as a business owner, especially with the number of entrepreneurs that fail in business due to money issues. By doing bank reconciliations well, and doing them before every time they disburse payments, can help business owners operate a business in such a way that they will not have them running out of money in their business.