Business owners need to understand that making financial decisions is very important to their business says Edmonton bookkeeping. And as such, learning how to make financial decisions. Is an extremely important part of business ownership.
Not only can learning how to make financial decisions help entrepreneurs avoid problems. But using the same information. Can help business owners make proactive business decisions. That can help their business grow.
For example, by learning how to look at their bank reconciliation. Can help entrepreneurs significantly says Edmonton bookkeeping. Because they will know how much money they have in their business.
They can look and see if they have enough money to run payroll, pay bills. Or even purchase an asset they need in their business to help them grow even more.
But also, if an entrepreneur looks at their bank reconciliation. To see that they do not have enough money in their business. They will be able to formulate a plan. On what they need to do to bring that money into their business in the first place.
They might make the decision that they need to engage in some revenue-generating activities, such as cold calls or doing more sales calls.
But also a business owner may decide that they need to spend more money on their marketing, off-line as well as online. So that they can bring more customers and complete more transactions in their business.
A business owner may also find that what they need to do is engage in some collection calls. In order to bring the money that they earned into their business sooner.
A business owner might look at the bank reconciliation. And understand that the reason why they do not have enough money. Is because they are not covering their costs well enough. And that they need to increase their prices.
All of these things can be extremely proactive in helping an entrepreneur make more money and grow their business. And so not only does looking at a bank reconciliation.
Help an entrepreneur avoid spending money they do not have. But can also help an entrepreneur be proactive in growing their business as well.
Edmonton bookkeeping says many business owners think that they should be able to discern all of this information from their bank balance alone. However this is not true.
The bank statement, or they can count balance. Will shown entrepreneur exactly how much money they have in their business at that exact moment in time. But what the bank statement, or bank balance will not tell them. Is how many transactions that they have made, that have not yet cleared their bank account yet.
Business owners might make the assumption that when they are looking at their bank statement or bank account balance. All of the checks that they have written have been cashed. But this is not necessarily the case.
Therefore, learning how to do bank reconciliations. Can significantly help entrepreneurs understand how much money they actually have to utilize in their business.
How fast do you need this Edmonton Bookkeeping service to be?
Many entrepreneurs lack a lot of financial knowledge about running a business says Edmonton bookkeeping. Because they have never run or owned a business before.
Even entrepreneurs that have gone to business school. Have gaps in their knowledge about learning the finances they need. To run their own business successfully.
Because of that, many entrepreneurs and up failing in business. In fact, industry Canada did a survey and found that the failure rate for entrepreneurs in Canada who are opening small businesses very high.
This study says that 15% of entrepreneurs in Canada failed within their first year of opening their business. While 30% of small business owners fail within their second year of opening their business.
And half of all small business owners will have failed by five years in their business. Which is an extremely high failure rate.
Edmonton bookkeeping says that industry Canada did a survey in order to find out what the businesses were struggling with. And what cause them to fail in their respective businesses.
What they found was truly shocking. And instead of a large multitude of reasons why business owners were failing. They came away with three things that business owners consistently said where the reason why they failed.
Third most common reason why entrepreneurs failed. Is because they could not find or keep enough staff in their business. This affected 23% of all failed entrepreneurs.
The second most common reason why entrepreneurs failed is because they ran out of money. Affecting 29% of all entrepreneurs that failed in their business.
And the single most common reason why entrepreneurs failed. Is because they could not sell enough products or services to enough customers to succeed. This affected 42% of all failed entrepreneurs.
Therefore, business owners who learn how to do bank reconciliations. Can avoid running out of money. Which is the second most common reason entrepreneurs fail.
The purpose of a bank reconciliation, is to ensure that a business owner knows how much money they actually have to utilize in their business. Since transactions take time to clear, business owners need to look at their bank reconciliation. Instead of their bank balance.
Once they do a bank reconciliation. Edmonton bookkeeping says they will see how much money they have left once all of the transactions that are pending have cleared.
But they also need to verify that the pending transactions are real. And are not a mistake of some kind. If an entrepreneur has made a mistake entering information into their accounting software.
It could look like a transaction that is pending. When that is not the case. It could be a mistake on an incoming transaction or an outgoing transaction.
And a mistake on an incoming transaction make it look like they have more money in their business to utilize. While a mistake on an outgoing transaction make it look like they have less money.
Therefore, business owners should go through their bank reconciliation to verify if pending transactions are real. So that they know how much money they actually have to utilize in their business.