The reason why bank reconciliations are so important is that they can help entrepreneurs make informed financial decisions says Edmonton bookkeeping. In fact, with 50% of all entrepreneurs feeling, and 29% of those entrepreneurs saying the reason why they fail is that they ran out of money, business owners can actually avoid this failure rate simply by thing informed, and making better financial decisions because of it.
Business owners may not do bank reconciliation, because they do not know what it is for. However, Edmonton bookkeeping says that bank reconciliations are going to help entrepreneurs understand how much money they have in their business to use. If people believe that they are able to look at their bank balances in order to get the same information, they are setting themselves up for making poor financial decisions. The reason why is because a bank statement will not show anyone the money that they have once all pending transactions have clear their bank account. Therefore, an entrepreneur who has recently written a two thousand dollars check we look at their bank balance several days later, and think that they have two thousand dollars to spend in their business, and they might make an asset purchase. Then, a day later, there two thousand dollars check might bounce, causing problems for the business owner, and mostly causing them to run out of money in their business.
By understanding how important a bank reconciliation is, entrepreneurs should get into the habit early on in their business of running this report prior to any financial decision. By learning how to do this early on, can help pair an entrepreneur for making informed financial decisions for the lifetime of their business. As their company grows, it will become more important.
Because of the importance of bank reconciliation, entrepreneurs need to first start accurately, proceed diligently, and review for errors always. If they make any mistakes along the way, they can end up with a bank reconciliation report that is inaccurate, which would cause an entrepreneur to make poor financial decisions, based on wrong information.
In order to start a bank reconciliation correctly, an entrepreneur should ensure that they are beginning bank balance starts where their previous bank reconciliation balance and off. This is a very important first step, because if those two amounts do not match, no matter what an entrepreneur does, the reconciliation report will end up being wrong. If these two totals do not match, an entrepreneur simply has to reconcile the previous report because additional transactions probably came in. By doing the reconciliation again, can help an entrepreneur ensure that they have accurate information to start the next report with.
By doing this, Edmonton bookkeeping says that entrepreneurs can ensure that they end up with accurate reports that can help them make informed financial decisions for the life of their business. Doing this consistently and accurately can help entrepreneurs ensure that they will not fall victim to running out of money in their business, and being proactive in all financial decisions.
Edmonton Bookkeeping | Best Practices When Preparing Bank Reconciliations
Not only is a very important for entrepreneurs to do bank reconciliations prior to any financial decision says Edmonton bookkeeping, but is also very important for entrepreneurs to check these bank reconciliations for errors before using them to make financial decisions with. The reason why is because there can be common errors that persist on the report and if an entrepreneur is not checking them regularly, and can cause the report to the wrong.
The most common reason for errors is uncleared items that are not accurate. Edmonton bookkeeping says that an uncleared item is anything that has been accounted for in the accounting software but has not come out of the bank account yet. Uncleared transactions can often make it look like an entrepreneur has more money to use than they actually do. Therefore, it is extremely important that entrepreneurs are verifying the accuracy of all uncleared transactions.
If an entrepreneur has entered a transaction and twice, or entered the date incorrectly, it can cause transactions to persist when they should not. By catching those, and fixing them, entrepreneurs can ensure the accuracy of their bank reconciliation. If they have noticed transactions such as checks have been uncleared for a longer period of time, they can call that vendor in order to verify that they received the checks, and remind them to cash it before it becomes stale dated. Checks over six months old are automatically and cashable, therefore it is important for businesses to be on top of all uncleared transactions.
Checks often take the longest to clear, because not only do they have to get through the mail most often, they also need to wait until they get to put into the bank account on the other end and then get cashed. Bank card and credit card transactions on the other hand, take much less time to clear, up to 1 to 5 business days. If entrepreneurs see these transactions have been uncleared longer than that, they should look for errors. And finally, electronic transactions should never be uncleared, because they should enter the bank immediately. Therefore, when entrepreneurs see pending electronic transactions, they should immediately look for the error.
When business owners are able to easily find errors in uncleared transactions, they can effectively ensure the accuracy of their bank reconciliations. They more often they do their bank reconciliation, the easier they are going to be able to catch these transactions because they will be familiar with how the report looks. By doing this on a regular basis, business owners can ensure that they have the most accurate and up-to-date tools to guide them to make informed financial decisions. However, if an entrepreneur finds that they are struggling with this, but within doing the bank reconciliation, doing it accurately, or fixing errors, an entrepreneur might be better off handing it over to Edmonton bookkeeping company such as always bookkeeping to manage their financial statements. By hiring a company like this, entrepreneurs can ensure that they can confidently use those statements to make decisions, without worrying that they are making the wrong decision due to the inaccuracy of the reports.