One of the first things that Edmonton bookkeeping recommends entrepreneurs do. Is learn how to do a bank reconciliation.
The reason why this is one of the first things that they should learn, is because it can help entrepreneurs understand how much money they have to use in their business. So that they do not and up over spending, especially if they end up looking at their bank balance to make those financial decisions.
The reason why business owners should not be looking at their bank balance. Is because while it shows exactly how much money they have in their bank account at that moment. It does not take into consideration. All of the transactions that are waiting to clear the bank account.
Therefore, if an entrepreneur has written checks that need to clear, or if they have pending electronic fund transfers. There will be less money in their bank account to use. Then is what is showing in their bank account at that moment.
But also, business owners may also have made deposits into their bank account, or are waiting for a debit or credit transactions to clear. Which are scheduled to go into an entrepreneurs bank account. Which will end up with or money in the bank account than what is represented in their bank statement.
This is why it is extremely important for entrepreneurs to do a bank reconciliation. Because it will allow an entrepreneur to look at all of the cleared as well as uncleared transactions. And end up with an amount of money that they will have and can utilize. Once all those pending transactions clear.
The first thing that entrepreneurs will do when they are learning how to do a bank reconciliation says Edmonton bookkeeping. Is start with their bank balance, and their previous bank reconciliation.
What they will do, is ensure that they are starting bank balance matches the ending balance of their last bank reconciliation. By verifying that these two amounts match. Will show an entrepreneur that there are no mistakes that have been made. That are causing the amounts to start incorrectly.
For example, if a transaction was entered incorrectly after the last bank reconciliation. But during the previous periods. It can often show up as a mistake on the current bank reconciliation.
By fixing this mistake early on. Right at the start of doing the bank reconciliation. Can help ensure that an entrepreneur will end up with the incorrect amount when they complete this important task.
The next thing that an entrepreneur needs to do. Is look at all of the transactions that have already cleared their bank account. Such as checks that have been cashed, or deposits that have actually cleared their bank account.
That will leave all uncleared transactions that are left. Allowing entrepreneur to verify the accuracy of those uncleared transactions says Edmonton bookkeeping.
By fixing the uncleared transactions, if they are errors. Can end up showing the correct final balance to the business owner. So that they know how much money they actually have to utilize in their business.
How will I know if you have the best Edmonton Bookkeeping?
The reason why entrepreneurs should learn how to do a bank reconciliation says Edmonton bookkeeping. Is because this is the tool that will help them understand exactly how much money have to utilize in their business.
If an entrepreneur is not consulting this statement in order to make financial decisions. They often end up spending more money than they actually have.
Good example of this, is if an entrepreneurs looking at their bank account. In order to make financial decisions. Without taking into consideration. That their bank balance not show how much money is left over once there pending payments have cleared.
In fact, 29% of all entrepreneurs who fail in Canada attribute their failure to running out of money in their business. And looking at a reconciliation. In order to make a more informed financial decision. Can help many entrepreneurs avoid this fate.
Once entrepreneurs are looking at their bank reconciliation, they should pay close attention to all of the transactions that have been booked in their accounting software. But have not yet cleared their bank account.
They can quickly determine which ones are actual transactions that simply have not cleared yet. And which ones are mistakes. For example, any electronic transactions that are showing as uncleared are always mistakes.
The reason why electronic transactions that are pending are mistakes says Edmonton bookkeeping. Is because the electronic funds typically show up in an entrepreneurs bank account even before they get notification that they are happening. And when they show up, show up immediately.
Therefore, if any are actually outstanding on the bank reconciliation. This is typically due to an error. And that error is usually booking that transaction and their accounting software twice. By cancelling out the duplicate entry. Can ensure that the bank reconciliation is more accurate.
Another transaction that entrepreneurs should pay attention to has not cleared. Are any checks that have been pending for longer than six months. While checks often take the longest to clear out of any transactions says Edmonton bookkeeping.
If the check has been outstanding for longer than six months. It becomes stale dated. Which means it is no longer is valid and is able to be cashed.
Therefore, business owners should look at their pending transactions over six months old. To ensure that these are not actually mistakes. And if they are mistakes, they can get them fixed.
But if this is a check that simply has not been cashed. A business owner needs to contact that vendor or supplier. In order to get them a new check. And avoid the previous checkout and write a new one. To fix the uncleared transaction.
By understanding that most outstanding transactions will only take a few days to clear. Can help entrepreneurs understand when they see transactions that have been pending for longer. So that they can fix those transactions that are errors.
Once not nor has completed their bank reconciliation. Will be of the see how much money they have utilize in their business.