It is extremely important for entrepreneurs to get into the habit as soon as they can about doing accurate bank reconciliations according to Edmonton bookkeeping. The reason why is so that entrepreneurs can use the information consistently to make important financial decisions in their business. Whether the financial decision is running payroll, paying their bills, buying assets that are going to help them grow the business, or even paying themselves. If entrepreneurs are making financial decisions without first looking at an accurate bank reconciliation, they may be putting their business at risk. Industry Canada says that half of all entrepreneurs in Canada go out of business, and 29% of those entrepreneurs say the reason why they failed was that they ran out of money. By looking at bank reconciliations part of making any financial decisions can help entrepreneurs avoid this fate.
Not only is it important that business owners get into the habit of reviewing their bank reconciliation before making any financial decisions, but these bank reconciliations need to be done accurately as well. If they are not done properly, Edmonton bookkeeping says that they will end up with information that is not reflective of what reality is, and can still put them at risk for making a bad financial decision. Therefore, entrepreneurs not only need to know how to do bank reconciliation, they also have to know how to check it for errors.
When an entrepreneur is doing bank reconciliation, but they are doing is comparing their bank balance to all of the uncleared transactions in their business. The final result should be a representation of how much money an entrepreneur has to use after all of the transactions such as checks have been cashed. In order to do proper bank reconciliation, an entrepreneur needs their bank statement and all of the various transactions that they have made. Credit card statements, a copy of every check that they wrote in that month, and their bank statement are all needed. Once they enter all of those transactions into their accounting software, they will end up with the final balance of how much money they have to use in their business.
It is very important that before an entrepreneur actually starts doing all of the bank reconciliation actions, they start from the correct place. They need to ensure that their bank balance matches the ending of the last bank reconciliation. If they do this, they will be able to end up with the correct information. If they do not ensure that their bank balance matches the previous bank reconciliation, no matter what they do, they will not end up with accurate results.
It can be very daunting for entrepreneurs to learn how to do proper bank reconciliation, therefore it may be in their best interest to contact Edmonton bookkeeping in order to have them take care of this for them. That way, entrepreneurs can ensure that the always have up-to-date as well as accurate bank reconciliations in order to make all of their financial decisions, and never risk spending more money than they actually have.
Edmonton Bookkeeping | Best Ways To Do Accurate Bank Reconciliations
One mistake that several entrepreneurs may end up making if they do not learn early on says Edmonton bookkeeping is spending more money than they have by looking at their bank statement. Many entrepreneurs believe that a bank statement is going to give them the information of how much money they have to spend, but this is actually not true. Transactions that are waiting to clear, such as checks that they have written, but have not been cashed by their vendor could actually make the bank account to look like they have more money to spend. If an entrepreneur spends all of the money in the bank, before waiting for pending transactions to clear, they will put their business at risk and spend more money than they have, running an entrepreneur out of money.
Not only is it important for entrepreneurs to be doing bank reconciliation regularly, before every financial decision, but it is also important that they check it for errors. If an entrepreneur does a bank reconciliation, without checking it for errors says Edmonton bookkeeping, they could be putting their business at much risk is if they had never done the bank reconciliation in the first place. There are several ways that entrepreneurs can check the information in a bank reconciliation to ensure its accuracy.
The most common way bank reconciliations have errors is in uncleared balances. These are transactions that look like they are waiting to clear and entrepreneur’s bank account. However, mistakes in entering the information may because transactions to be uncleared. For example, if an entrepreneur accidentally entered a check twice, one of those checks will show as uncleared. Before an entrepreneur uses the bank reconciliation to make financial decisions, they should look at every single uncleared transaction and verify its accuracy.
Other transactions that might take time to clear are bank machine and credit card transactions. Often, these transactions can take a day or two, but business owners need to be aware that they may take up to five days or a week, depending on when that transaction was made. For example, if an entrepreneur put checks into a bank machine Friday nights before a long weekend, those transactions might not clear for several days. By looking into each transaction, and verifying that they are actually waiting to clear, an entrepreneur can either accept the uncleared transactions or kick them out for being inaccurate.
By being diligent in not only doing bank reconciliations accurately but also verifying that there are no mistakes, it can help entrepreneurs end up with the most accurate financial information for their business. Learning how to read these statements before making any financial decisions in their business will help them avoid financial disaster. If they have any questions about how to do proper bank reconciliation, they should contact and Edmonton bookkeeping company like always bookkeeping and asked them for help, so that they can ensure that they have the best information for their business as possible.