It is extremely important that entrepreneurs understand that bank reconciliation reports are the key to ensuring that they are making informed financial decisions in their business says Edmonton bookkeeping. However, business owners also need to realize that they need to be watching these reports to verify the accuracy of the information. The reason why is because if entrepreneurs have errors their bank reconciliation, the financial decision they make may cause them to make mistakes and to spend more money than they have.
In order to understand how mistakes can happen, entrepreneurs need to understand what exactly a bank reconciliation is. While a bank balance is going to show a business owner how much money they have currently in that moment, a bank reconciliation shows an entrepreneur how much money they have after all pending transactions have cleared. Such as checks that they have written. If a business owner makes decisions based on their bank balance, and not the bank reconciliation, they may spend that they do not have. In his shoes
The reason it is important to know this, prior to understanding what mistakes can commonly happen on the bank reconciliation says Edmonton bookkeeping, is because these uncleared transactions are the most common error that exists on the statements. Edmonton bookkeeping says that about 50% of the time, their clients end up having uncleared transactions and error on their statements.
If an entrepreneur has noticed that the uncleared transactions have been pending for longer than a few weeks, that might point to an error. The reason why, is because a bank card and credit card transactions typically only take a few days, or maybe a week to appear in the bank account. therefore, if an entrepreneur sees pending transactions for longer than a couple of weeks, they should look to see if maybe there is an error entering the transaction in twice, or in an error with the date. By clearing up those errors, a business owner can ensure the accuracy of their bank reconciliation.
The reason why it is important to catch these particular errors because these transactions can either make it look like an entrepreneur has more money in their business than they do says Edmonton bookkeeping, or, it can make them look like they owe more money to vendors than they actually do. By clearing out uncleared transactions, entrepreneurs can ensure the accuracy of the final balance of their bank reconciliation.
If an entrepreneur has checks that there is no errors, it may point to someone taking that deposit before it reached the bank, and if it is a check, it could be because that vendor has not cashed the check yet, so in order to avoid it getting stale-dated, entrepreneurs should call that company and verify they received the check, and if they have they should cash it. If they have not, an entrepreneur can issue another one and stop payment on the existing one.
With how important bank reconciliations are, business owners should get into the habit of learning how to run them regularly and accurately. By doing this, entrepreneurs can ensure the financial decisions they are going to make can positively impact their business, instead of causing their business to run out of money.
Edmonton Bookkeeping | Are Errors Common On Bank Reconciliation Reports
Business owners need to understand how important bank reconciliation. It is are in helping them make informed financial decisions in their business says Edmonton bookkeeping. Therefore, learning how to do them properly is extremely important. If business owners are not running bank reconciliations prior to making financial decisions like paying staff, vendors or themselves, then they could end up making decisions that cause their business to run out of money and fail.
In order to start a bank reconciliation properly, an entrepreneur needs to ensure that they check the statement balance to verify that it is the same as the ending previous statement balance if it does not match, this is typically because additional transactions happened after the last bank reconciliation. All an entrepreneur needs to do is we reconcile the previous report, and statements should match each other.
Edmonton bookkeeping says that if entrepreneurs do not verify that the statements match before they start the bank reconciliation, no matter what they do to ensure the accuracy of the report, it will not be correct. Therefore, it is extremely important that an entrepreneur is starting accurately and properly, so that they can have the best and most accurate report.
Once they verify that the statements match, the only other things that an entrepreneur needs in order to do a proper bank reconciliation, is their bank account balance, their bank and credit card statements, as well as a record of all the checks written in the past month. They enter all of this information into their accounting software like QuickBooks or put books online, and that will end up with the report. Edmonton bookkeeping says that what the report should be able to show business owners is: their beginning balance, all cleared transactions, incoming deposits, and the ending balance. Most importantly, a business owner will see a list of all uncleared transactions. Verifying the accuracy of these uncleared transactions one of the most important ways to verify the accuracy of the entire report.
Uncleared transactions for example are when an entrepreneur uses their bank card, or credit card and it has not shown up in their bank account yet, but they have already taken into consideration in their accounting software. Such as checks, if a business owner has sent out a check but it has not been cashed, it will appear as an uncleared charge. If charges appear pending for to long, this generally is indicative of a problem. The problem is usually an incorrect date or duplicate entry. By fixing these errors, an entrepreneur can ensure that the amount that they report shows, is an accurate flexion of how much money they actually have to use in their business. They can then use the information confidently to make financial decisions in their business.
If business owners discover that this is difficult for them to accomplish, or they simply run out of time in order to be able to run a bank reconciliation, they should hire and Edmonton bookkeeping company like always bookkeeping, will allow them to have accurate and up-to-date bank reconciliation reports so that business owners can competently make financial decisions in their business.