While many entrepreneurs understand that it is important to run a bank reconciliation prior to making any financial decisions says Edmonton bookkeeping. However, if they do not understand how to correct errors, they may as well not be using tank reconciliations at all. The reason is that if there are errors in the statement prior to making their financial decisions, they could make an error in judgment, that could end up having them spending more money in their business than they have. Industry Canada says that half of all entrepreneurs in Canada go out of business, and 29% of those business owners say the reason why their business failed was that they ran out of money. Fixing mistakes on bank reconciliations is an important task for entrepreneurs to do to ensure they end up with the most correct financial statements to help them make the best decision possible.

The first thing that business owners need to understand is what a bank reconciliation is. Edmonton bookkeeping says that it is a statement that is going to show an entrepreneur exactly how much money they have in their bank that they can use. One error that many entrepreneurs, especially when they are new in business make is they look at their bank statements and think that they can spend all of the money that it shows. This is a mistake because if they have made payments that simply have not come out of the bank yet, the bank statement will not take that into consideration. For example, if an entrepreneur has written a five thousand dollars check, and it has not yet cleared the bank, if they see that they have five thousand dollars in the bank and spend it, they will cause that pending check to bounce.

The bank reconciliation takes the bank statement and subtracts all of the pending transactions from it, so that an entrepreneur sees exactly how much money they have in their business to use. Checks are one of the most common uncleared transaction that entrepreneurs will have. However, there are other transactions that might need to clear in order for an entrepreneur to have the right bank balance. For example, if a business owner either put money in, or taking money out at a bank machine, that might not show up on their bank statements for a few days.

By going through the process of doing bank reconciliation, a business owner will be able to see exactly how much money they have to use in their business. This can aid significantly and making financial decisions matter how big or small they are. Prior to running payroll, paying their bills, or even purchasing and assets in their business that they might need to make their business grow, by looking at the bank reconciliation, a business owner can determine that they have the funds to disburse that cash. However, if business owners are struggling with either doing bank reconciliation or correcting it, they should contact Edmonton bookkeeping in order to help them end up with timely and correct financial statements in order to make decisions.

Edmonton Bookkeeping | Correcting Errors In Bank Reconciliations

Once an entrepreneur is in the habit of running bank reconciliations on a regular basis, Edmonton bookkeeping says the next step is for them to learn how to consistently correct errors. If these financial statements exist with mistakes on them, they are not going to be able to help an entrepreneur make the right decision on whether they can disburse that cash or not. Learning how to fix errors is easy, but business owners need to be doing it consistently, and thoroughly in order to end up with accurate statements.

One of the first things that they need to do when looking at their bank reconciliation in order to fix mistakes, is looking at all of the uncleared charges. What an uncleared charge is, is a transaction that looks like it is waiting to be taken out of the bank account. For example, when a business owner writes a check, because they will have put that check into their accounting software it will show up on their financial statement. When that vendor cashes that check, and it takes the money out of their bank account, then it becomes clear.

The reason why entrepreneurs should be looking at all of the transactions that are uncleared is so that they can remove the ones that are in error. For example, if an entrepreneur accidentally entered that they wrote a check twice when the only road it once, Edmonton bookkeeping says that the one check will clear, and the other one will remain on the bank reconciliation. By finding that it is a duplicate charge, and removing it helps ensure the accuracy of the bank reconciliation. Another way that uncleared charges might be in error, is if the business owner entered of the wrong date on the transaction. By looking at all uncleared transactions, and verifying the date, uncleared transactions can drop off once they have the date fixed. Edmonton bookkeeping says ensuring the accuracy of these uncleared transactions is important.

Once an entrepreneur has gone through each uncleared transaction, in order to verify that they are accurate, the next thing they need to do is look at how long checks have been uncleared for. Since checks get stale dated within six months and unusable, business owners should be aware of when the checks that they have written are getting to that point, so that they can contact their vendor and remind them to cash that check before it becomes unusable.

By learning what mistakes are common on bank reconciliations, Edmonton bookkeeping says business owners can learn how to take those charges out, and ensure that they have the most accurate bank reconciliation for them to make financial decisions with. However, if they are struggling with getting their bank reconciliations done either in a timely fashion or correctly, they might want to consider hiring a bookkeeping company like always bookkeeping in order to help ensure that they have accurate and up-to-date financial statements at all times. I do this, they can ensure that they are making informed financial decisions and not put their business at risk of running out of money.