Not only is ensuring business owners have bank reconciliations on a regular basis in their business is important says Edmonton bookkeeping, but so is verifying the accuracy of the information in the report. 50% of all businesses in Canada end up failing, and 29% of those failed entrepreneurs say the reason why they failed is that they run out of money in their business. Helping entrepreneurs have accurate and error-free bank reconciliations can significantly help entrepreneurs avoid running out of money in their business, by being able to make informed financial decisions.
The first thing that business owners need to know is what a bank reconciliation is, and why it is important to. It is going to help entrepreneurs understand how much money they have in their business to spend. If they believe that they can look at their bank balance in order to find that information out, they may be putting their financial decisions at risk. While their bank account may show exactly how much money they have in their bank account in that moment, but it will not show is how much money they have to use once all transactions both in and out of their business have cleared. This is the exact purpose of the bank reconciliation says Edmonton bookkeeping. They will help business owners understand exactly how much money they have to use, taking into consideration all the transactions both out of and into their business.
With how important this report is, business owners can easily see that if this report has errors in it, it will ensure that a business owner is not able to use that report to make important decisions. However, if they are unaware of the errors in it, the decisions they make may put the business at risk. Therefore, business owners not only need to know how to do bank reconciliation, but they also need to know how to check it for errors and fix them.
Uncleared transactions are all of the pending transactions in a business that have not happened yet. For example, if a business owner has written a check, and they are waiting for that check to be cashed. Edmonton bookkeeping says that they have seen about 50% of their clients leave incorrect uncleared transactions in their bank reconciliation because they either are not aware that they are mistakes, or they know how they are mistakes but they do not know how to fix them. Learning how to check uncleared items to see if they are mistakes, and then how to fix them if they are incorrect, is some of the most important things that an entrepreneur can do once they learn how to do a bank reconciliation.
By understanding the importance of this report in their business, business owners can ensure that not only are they running the report as often as they are making financial decisions, but also how to verify the accuracy of and fix mistakes is important to the business owner has a great tool that they can use confidently in order to make financial decisions that are going to benefit their business.
Edmonton Bookkeeping | Catching Errors On Bank Reconciliations Is Important
There are several things that entrepreneurs should learn when it comes to their financial statements, and bank reconciliation reports say Edmonton bookkeeping. Learning how to do them properly, and learning how to fix mistakes can help ensure that entrepreneurs are ending up with reports that can help them make informed financial decisions in their business. Whether that is decisions are running payroll, paying bills, or even purchasing assets they might need to help their business grow. The matter how big or small the financial decision is, entrepreneurs should get into the habit of creating this report prior to making any decision about finances in their business.
The first place for entrepreneurs to start is to verify that the beginning of their statement balance matches the ending balance of the previous statement. These two totals need to match up, and if they do not, Edmonton bookkeeping says no matter how accurately the rest of the bank reconciliation is, a business owner will not end up with the right information. By understanding this is a place to start, can help entrepreneurs ensure that they are beginning error-free.
Once an entrepreneur is ready to enter all the information into their bank reconciliation, but they need to do is ensure they have all of their bank statements and credit card statements, their bank accounts and all checks written in that month. They will enter all of this information into their bank reconciliation, and when they are finished, their reconciliation report should show their beginning balance, all cleared transactions, the income deposits, and the ending balance. It is also going to show a business owner all of the uncleared transactions that are still waiting to get entered into or out of the bank account.
Very important that entrepreneurs look at these uncleared balances, in order to check their accuracy. The reason why, is because uncleared transactions can make it look like a business either has more money going into their business then they do, or that they have to pay more bills than they actually do. The accuracy of the entire report depends on the accuracy of the uncleared transactions. Therefore, it is very important that business owners review this carefully each time they do a bank reconciliation report.
If business owners are not able to take the time to either do the report prior to each financial transaction or be successful in checking or catching errors, the best thing for them to do is to contact an Edmonton bookkeeping company like Always Bookkeeping in order to have them prepare timely and accurate bank reconciliation statements for them. That way, they can ensure they have statements, and be confident in the accuracy of those statements to help them make decisions that will allow them to benefit their business, not put it into jeopardy.