If business owners do not understand the importance of doing bank reconciliations says Edmonton bookkeeping, they may not do them, or they may do them carelessly, which could end up with an entrepreneur making a poor financial decision that causes the business to run out of money. Not only do entrepreneurs need to be careful when doing bank reconciliations to ensure that they are as accurate as possible, but they also need to know how to troubleshoot and fix errors, so that they end up with the most accurate financial statements possible.
When the reason why business owners may choose not to do bank reconciliation, is because they think they can figure out how much money they have in their business to spend by looking at their bank statement. However, Edmonton bookkeeping says that bank statements will show an entrepreneur how much money they have once transactions have cleared. Therefore, the bank statement is not an accurate reflection of how much money an entrepreneur has to use.
In order to start doing a bank reconciliation properly, a business owner should understand the differences between the registered balance and the statement balance. The statement balance should match the bank statement and the registered balance should match the last reconciled amount. An entrepreneur needs to use both of these in order to properly reconcile a bank account to.
Edmonton bookkeeping says that the very first step to do a proper bank reconciliation is checking the statement balance against the bank statement. The reason why is to verify that these two amounts are the same. If they are not, matter how accurately the rest of the reconciliation is done, it will not end up with the correct information. Therefore, business owners should be careful to always check the statement balance first when starting out.
The second step is for an entrepreneur to check the registered balance to see if it matches the ledger. If it does not, the mistake is typically if an entrepreneur has entered a date and correctly, and entered the transaction is happening in the future. If the registered balance does not match, an entrepreneur can simply look for the incorrectly deeded transaction and fix it says Edmonton bookkeeping.
The next thing that entrepreneurs should be looking for when they are doing bank reconciliations is uncleared charges. Most of the time, uncleared charges are transactions that simply need to clear the bank account. However, uncleared charges can also indicate a mistake. Business owners should look at the transactions that are uncleared, to verify that they either have admin entered twice or that the data is accurate. By fixing these mistakes, an entrepreneur can verify that the uncleared charges are accurate, and can proceed to the next step doing the bank reconciliation.
Doing a proper bank reconciliation needs concentration, and diligence to verify the accuracy of the information. If an entrepreneur finds that it is too difficult for them to spend the time doing a bank reconciliation properly, they should contact and Edmonton bookkeeping company like always bookkeeping to help them get their financial statements done properly so that they can ensure they have accurate financial information in order to make business decisions with.
Edmonton Bookkeeping | Avoiding Financial Errors By Using Bank Reconciliations
Business owners should understand early on that it is important to do bank reconciliations prior to any financial decision says Edmonton bookkeeping. That way, they can understand exactly how much money they have used in their business, and whatever financial transaction they need to do, whether it is paying a vendor, paying staff, or purchasing assets to help grow their business. If an entrepreneur does not look at their bank reconciliation, or if their bank reconciliation is incorrect, they may spend more money than they have in their business, causing other payments to bounce, and an entrepreneur to run out of money.
What a bank reconciliation is, is a report that tells a business owner exactly how much money they have in their business that they can actually use. This takes into consideration not only how much money an entrepreneur might have in their bank account, also all of the transactions that are waiting to come out of the bank as well as go into it. It is important to look at a bank reconciliation instead of the bank account because a bank account will not take into consideration all of the transactions waiting to clear.
There are many ways that there can be errors on bank reconciliation, therefore Edmonton bookkeeping says that entrepreneurs need to be very diligent in taking their time to do it properly, as well as fixing errors so that they can end up with the most accurate statements possible. Also, another mistake that entrepreneurs often make, is that they are not doing a bank reconciliation any time they make a financial decision. If business owners are using a statement that is been prepared at the beginning of the month, and it is almost the end of the month, many transactions both in and out of the business may cause that bank reconciliation to be inaccurate. Business owners need to ensure that not only are they doing it accurately, but as often as they are making decisions with the money in their business.
Uncleared transactions are one of the most common errors that Edmonton bookkeeping sees in their clients. About 50% of the time, there are errors in uncleared charges that entrepreneurs either do not realize that are wrong, or they do not know how to clear them. Uncleared deposits will end up making it look like a business has more money than they do. This could cause a business owner to make a purchase they cannot afford. Uncleared checks being sent out of the business, makes it look like a business owner owes more money than they do, and may keep them from making important purchases that can help them grow their business.
If entrepreneurs have any questions about how to do a proper bank reconciliation or would like to ensure that they always have accurate reports, they should contact Edmonton bookkeeping companies like always bookkeeping in order to ensure that they have the most accurate financial statements possible, so that they can avoid making poor financial decisions that would cause them to run out of money in their business.