When a business owner is new in their entrepreneurship, Edmonton bookkeeping says it is very important for them to learn how important it is to do bank reconciliations prior to spending money. One of the first things that they should learn, is how to check this financial statement in order to determine how much money they have in their business to use. However, just running a bank reconciliation is not enough, it has to be done properly, and then checked for errors. Without checking this financial statement for mistakes can create a statement that does not help an entrepreneur learn how much money is available to spend.
In order to understand how errors can exist on bank reconciliation, Edmonton bookkeeping says an entrepreneur needs to understand exactly what information is on a bank reconciliation. This financial statement shows exactly how much money an entrepreneur has in their bank, and then subtracts the number of transactions that are waiting to clear, such as checks that need to be cashed. The final results, is a balance showing how much money an entrepreneur can use, after all of the transactions come out of their bank account.
Once entrepreneurs understand what a bank reconciliation is, the next important thing that they need to know is that it is important to check all of the transactions that are waiting to go into, or out of an entrepreneur’s bank account. The reason why is errors on entering the information can cause them to remain on the financial statements, even though it may have already come out of the bank account. For example, if an entrepreneur accidentally enters a check twice into their accounting software, it will look like there is more money that should be coming out of the bank account then actually is. By looking at all of the uncleared transactions, an entrepreneur can eliminate all of the incorrect ones, and end up with a final amount that represents how much money they actually have to use in their business.
Not only is it important for business owners to ensure that they are running bank reconciliations on a regular basis, but that they are doing so carefully, and then reviewing it for errors so that they know exactly how much money they have to use in their business. Not only is it checks that they have to be careful of, but any transactions including credit cards and bank card transactions both into and out of their bank account. They should be looking at the dates, to ensure that the dates have been entered correctly and that these transactions were not entered it twice.
Reviewing the uncleared transactions on a regular basis, business owners will be able to end up with financial statements that can tell them exactly how much money they have in their business so that whether they have to run payroll, paying vendors, they will know exactly how much money they have to use, or if they need to generate more income before they can disburse that payment.
Edmonton Bookkeeping | Checking Uncleared Balances On Bank Reconciliations
A business owner who uses financial statements with mistakes on them in order to make financial decisions in their business is putting their company at risk says Edmonton bookkeeping. If a business owner taking the time to create bank reconciliations, but not taking the time to review them for errors might end up with financial statements that do not represent how much money they have to use in their business. 29% of all failed businesses in Canada say that the reason why their business failed was that they ran out of money. Helping business owners make informed financial decisions can significantly help them avoid this fate.
In order to end up with financial statements that are accurate, business owners need to understand that the reports that they start with have to be accurate as well, otherwise they will never be able to end up with accurate bank reconciliations. Therefore, a business owner should always ensure that their starting bank statement is the same as where their previous bank reconciliation total ended. If they do not verify this, no matter what they do, the end result will not be accurate. If the two totals do not meet however, a business owner will have to reconcile the previous monthís totals, because additional transactions will have because these two numbers to be out.
When entrepreneurs ready to reconcile their bank account, once they verified that there bank balance and previous bank reconciliation match, they will then need their credit card statements and all of the checks that they have written in the past month. By entering all of these transactions into their accounting software, an entrepreneur will end up with a registered balance that shows a business owner how much money they have to use in their business.
One thing that business owners need to be aware of once they have finished this financial statement says Edmonton bookkeeping is that all of the uncleared transactions are accurate. They can do this by comparing it to their previous monthís bank reconciliation if there are any transactions that have been outstanding since the previous month, should because an entrepreneur to investigate the reason why. It might be at check that has not been cashed, and a business owner should call their vendor to ensure they received the payment, and to remind them to cash it.
By learning the proper way to do bank reconciliation, from start to finish including checking errors can help business owners ensure that they are spending money responsibly in their business. However, if business owners are either struggling with doing bank reconciliations consistently or struggling with checking them for errors, they might be better off contacting Edmonton bookkeeping companies like always bookkeeping to help them stay on top of all of their financial statements in their business. By hiring professionals, business owners can focus on growing their business, and knowing that they will have the financial statements ready to help them make informed financial decisions.