One of the most important things that entrepreneurs can do in their business says Edmonton bookkeeping, is to learn how to do a proper bank reconciliation. The reason why this is so important is that important financial decisions that business owners need to make throughout the month should be made after consulting an appropriately done current bank reconciliation. The reason why this is so important is that 50% of all Canadian entrepreneurs end up failing in business before they have been in business for five years. When industry Canada ask these entrepreneurs the reason for their business failure, 29% of them said that the reason why their business failed was that they ran out of money in their business. If entrepreneurs are able to increase the accuracy of their financial decisions, they should be able to avoid running out of money in their business.
In order for entrepreneurs to do appropriate bank reconciliation, they only need three things: bank statements for the month they are reconciling, a list of all of the checks they have written in that same time period, and the last bank reconciliation that they did. Most importantly, business owners need to ensure that they have the time to do a bank reconciliation properly and that they are dedicated to doing it properly and reviewing the information.
The steps that business owners need to take an order to ensure the accuracy of their bank reconciliation right from the start says Edmonton bookkeeping is by looking at the previous bank reconciliation ending balance and comparing it to the starting balance of their current bank statement. If the two numbers match up, that can ensure that the business owner is going to start off exactly where the last bank reconciliation left off. If for some reason it does not match up, this could be because additional payments were made or payments coming in after the bank reconciliation was complete. If that is the case, business owners should go back and do the previous time periods bank reconciliation. It should not take a long time to do, and it is an important step in ensuring the accuracy of the current time periods reconciliation.
If entrepreneurs are using software like QuickBooks online, entering all of the transactions will be automated. If that is the case, Edmonton bookkeeping says that entrepreneurs simply need to take their bank statements and verify that all of the transactions have been uploaded and that they have been uploaded properly. This should not take a long time but is important in order to ensure the accuracy of the upload.
By being extremely diligent and using care when doing their reconciliation, business owners can ensure they have a report that is as accurate as possible to help guide them make informed financial decisions in their business. By doing this on a regular basis, business owners can be confident that they are never going to make a decision in their business that will cause them to run out of money.
If business owners do not understand the importance of doing bank reconciliations for any time they disburse payments in their business says Edmonton Bookkeeping, they may end up being sloppy or not checking for accuracy which can result in problems later on for example at year-end. It also can cause them to have the inaccurate financial information and when they use that information in order to decide if they have enough money to make purchases, it could end up causing problems with them not having the money that they think they have. Business owners should always take due diligence and care in ensuring they are entering the right information for their bank reconciliation so that it can be a powerful tool for their business.
In order to start doing the bank reconciliation, entrepreneurs should be verifying that they are starting from the right place. The beginning balance of their bank statement should match the final balance of the previous bank reconciliation. If this matches, Edmonton bookkeeping says that business owners can proceed with the reconciliation.
When they are complete, the way that they can check to ensure the accuracy of the report is to check the ending balance to see if it matches their statements. If it does, they can move to the second check which is to look at the registered balance Edmonton bookkeeping says if that matches GL for the bank balance sheets, a business owner can be certain that their bank reconciliation has been done properly.
It is important that business owners keep doing this check system, when they are about to start reconciling their next month’s report, they should go back and verify that the statements still match each other, because if changes were made after their last report, it could trigger things to be slightly out. Re-doing their reconciliation and checking again can be powerful in ensuring that they have the reports starting at the right point.
It is important for business owners to do this check system every single month and every single time they run a bank reconciliation report. If they do not do this on a regular basis, not only are they not ensuring the accuracy of the reports, and making them a less reliable tool in order to make financial decisions with, but it can also trigger their year-end financials to be out significantly, which is going to take extra time and extra money in order for their accountant to fix.
By being diligent and careful with their bank reconciliations, entrepreneurs can ensure that the information is as accurate as possible so that they can use the information to help guide make financial decisions in their business. Because of the time, it takes to run a report properly with the right reviews in place, is owners should plan all of their payments and cash disbursements around when they are going to do the bank reconciliation.