Many entrepreneurs do not understand why it is very important to have properly done bank reconciliations according to Edmonton bookkeeping and rush through the process. When this happens, they often end up with financial statements that have errors in them, that because business owners to make poor financial decisions. If they end up spending more money than they have, they could cause their business to run out of money, which is the reason why 29% of failed entrepreneurs say their business was not successful. Therefore, if an entrepreneur is going to do their own bank reconciliation, not only do they need to know how to do it properly, but also how to troubleshoot for errors to ensure the statement is accurate.
If entrepreneurs understand why they need to do bank reconciliation, they might be more diligent ensuring they are doing it accurately to avoid errors. Edmonton bookkeeping says that bank reconciliations are for the purpose of understanding exactly how much money is available in the business. Business owners who make the error of thinking they can simply look at their bank balance in order to know how much money they have in their business and often end up making mistakes and spending more than they have.
If an entrepreneur is only looking at their bank balance, they are not taking into consideration uncleared transactions that can affect the accuracy of the bank balance. For example, Edmonton bookkeeping says that if an entrepreneur has sent out several checks, but the checks have not cleared, or only some of them have cleared, it may make the current bank balance look as though the bank has a certain amount of money in it. However, once those checks clear, there will be less available money in the bank.
Bank reconciliation is how an entrepreneur is able to figure out how much money they have available, taking into consideration all of the transactions that are coming into their business, as well as going out of their business. Therefore, an entrepreneur should consult a bank reconciliation pride making any financial decision, so that they can verify they have the money in their business to make that decision. Whether it is running payroll, paying bills, or even making an asset purchase, before an entrepreneur uses any of their money, they should get into the habit of reviewing a recent bank reconciliation.
By looking at a bank reconciliation, Edmonton bookkeeping says that entrepreneurs can either make that financial decision, knowing Bill has the funds available for it, or if they do not they can come up with a plan on how they are going to get that money. For example, if entrepreneurs do not have enough money to run payroll, they can do some collection calls, or engage in some revenue-generating activities to bring their bank balance up so they can afford that purchase.
By ensuring entrepreneurs are using bank reconciliations consistently in their business, they can ensure that they are never going to the full victim to running out of money due to making poor financial decisions. This can help entrepreneurs spend money confidently, or come up with plans on how they are going to ensure they have the money to reach all of the goals in their business. It is extremely important that entrepreneurs use bank reconciliations, as well as ensure their accuracy.
Edmonton Bookkeeping | Fixing Bank Reconciliation Errors
Many entrepreneurs understand how important it is to do bank reconciliations, says Edmonton bookkeeping. However, they also need to understand how to do them properly, and how to fix errors. Ensuring the accuracy of the statement is as important as getting done. If there are on a check to errors on bank reconciliation, it can cause an entrepreneur to make poor financial decisions that could negatively impact their business.
One of the first things that an entrepreneur has to do when starting to do bank reconciliation, is checking their statement first. The statement balance needs to match the previous bank reconciliation ending balance. To ensure that the two amounts match. If they do not match, no matter what a business owner does, and how many errors they fix, they will end up with an inaccurate report.
An entrepreneur also needs to understand what an uncleared charge is. There may be any number of uncleared charges on a bank reconciliation report at any time. These are caused by transactions that a business owner is aware of, and have entered into their accounting software, but has not cleared their bank account yet. This can be in the form of incoming as well as outgoing checks, transactions made at a bank or at a bank machine, as well as credit card transactions. Edmonton bookkeeping says that entrepreneurs need to understand why transactions might show as uncleared not only so that they can understand what it means, but so that they can catch errors as well.
Catching errors in uncleared charges usually means looking at how long they have been uncleared. Bank card transactions and credit card transactions should not appear for more than a couple of days, so if they have shown up on two consecutive bank reconciliations, an entrepreneur should check to verify it has not been an error. Perhaps they entered the transaction twice or puts the wrong date on the transaction. Fixing one of those two things will cause the uncleared transaction to drop from the reconciliation report.
However, Edmonton bookkeeping says that if entrepreneurs have verified that there are no errors on in uncleared check, they should contact the person who received the check, to verify that they did receive it in fact, and to remind them that they should cash it. If checks have been uncleared for more than six months, they become stale dated which means they are unusable and cannot be cash. Business owners should be verifying with customers that they receive the check so it does not become stale dated.
By being aware of all the ways that there can be errors on their bank reconciliation, and how to fix them can help business owners ensure they have the most accurate financial statements possible. When they use the statements to make decisions in their business, the accuracy of the information should give entrepreneur confidence that they are making the best decision for their business, that can help them grow and be successful.