Many entrepreneurs understand how important it is to do a bank reconciliation prior to making any payments in their business says Edmonton bookkeeping. However, what many entrepreneurs might not understand, is if they are not reviewing the statement for errors and fixing uncleared transactions, they may end up with statements with mistakes on them that will cause them to make poor decisions. In order to avoid making the wrong financial decision in their business, business owners need to also learn how to fix errors on their financial statements.
A bank reconciliation shows an entrepreneur how much money they have to use, once all pending transactions have been subtracted from the business owner’s bank account. These pending transactions typically represent all of the various payments that an entrepreneur has made in their business, or has received that have been logged into their accounting software, but has not cleared their bank account. For example, the most common uncleared charge is a check that a business owner has written, and entered into their QuickBooks software, but it has not been taken out of their bank account yet.
The bank reconciliation is considered extremely important because it will show a business owner exactly how much money they have to use in their business, once all outgoing and incoming transactions have been accounted for. One thing that a business owner needs to watch out for according to Edmonton bookkeeping is any uncleared transactions that have been uncleared for longer than it should take to go through the bank account. In order to know which transactions are the ones that entrepreneurs pay attention to, a business owner should be familiar with how long it takes various transactions to clear their bank account.
Checks typically take the longest, simply because they usually have to wait until the person who receives them puts them in the bank. Because of this, it is common for checks to be uncleared for several weeks or a month or longer. However, business owners should be aware that any transactions involving bank cards, debit machines or credit cards should only take a couple of days. One at the quickest, and up to five at the slowest. Business owners should also that take into consideration when these transactions were done, in order to understand if they are outstanding for longer than necessary. For example, credit card transactions that were taken Friday evening of a long weekend might have those transactions take longer than one or two days to clear.
By looking at the transactions that have taken the longest to clear, business owners can review the information to see if perhaps there was an error and entering the information, that would result in these transactions persisting on the bank reconciliation. By fixing these mistakes, entrepreneurs can ensure that they are ending up with financial statements that are as accurate as possible. However, if they have any questions on how to run a bank reconciliation properly, or how to fix the errors, business owners should contact their Edmonton bookkeeping company to answer any questions they might have.
Edmonton Bookkeeping | Fixing Uncleared Transactions On Bank Reconciliations
When entrepreneurs are familiar with what their bank reconciliation looks like, Edmonton bookkeeping says it can become much easier for them to fix mistakes, and end up with the most accurate financial statements possible. Since a bank reconciliation is extremely important for business owners to review prior to making any financial decisions in their business, learning how to correct errors is extremely important to learn.
The most common mistake to appear on bank reconciliations statements are items that show as uncleared. There are two common mistakes that lead to items showing as uncleared. If a business owner has accidentally entered a payment in twice, once the actual payment clears the entrepreneur’s bank account, it will leave the statement, but the second one will persist. Since no other payments coming in are going to match that amount, it will simply stay on the report, being uncleared. Therefore, if business owners see an uncleared amount on the bank reconciliation for more than a month, they should review it in order to determine if it has accidentally been entered it twice says Edmonton bookkeeping.
Another reason why an uncleared balance might show up on the bank reconciliation in error is if the business owner made a mistake entering the date when they were entering the transaction into their accounting software. If the date does not match the transaction as it clears the bank account, it will show up on the statement indefinitely. Therefore, business owners can review this statement and if there is an error with the date of the payment, fixing the date will remove the charge from the statement.
Business owners should also be aware of any outstanding amounts that are uncleared if they are electronic in nature. The reason for this is because no electronic amounts should ever be uncleared. The reason why is because these electronic transfers happen immediately, and should not ever be listed on a bank reconciliation. If business owners see any electronic transactions that are listed on bank reconciliation, they should automatically know that that is an air that needs to be fixed.
The reason why business owners will want to remove these uncleared charges from their bank reconciliation is that they can end up making it look like a business owner has more money in their bank than they actually do. By not removing uncleared charges, business owners are putting themselves at risk for making financial decisions that they actually cannot afford. Therefore, it is extremely important that when business owners are doing their bank reconciliation, that they do it regularly, start by verifying the starting balance, and then fixing errors says Edmonton bookkeeping.
Learning how to do a bank reconciliation properly is an extremely important task for business owners, and if they are feeling overwhelmed with the task, they can simply contact their Edmonton bookkeeping company like always bookkeeping who will be able to help them get up-to-date financial statements. The hiring out this task, entrepreneurs can ensure that they are getting up-to-date and accurate financial statements including bank reconciliations on a regular basis, they can confidently use to make financial decisions in their business.