It is very important for entrepreneurs to learn how to do bank reconciliations early on says Edmonton bookkeeping. Because it will help them make more informed financial decisions.

In fact, business owners should get into the habit of reviewing this document. Before making any financial decision. Whether that is running payroll, paying bills, making purchases. And even before an entrepreneur pays themselves a salary or dividends in the business.

They should look at their bank reconciliation. In order to see if they have the funds to be able to make that decision in their business. If they do not look at this document. They could cause themselves to run out of money.

In fact, 29% of all entrepreneurs fail in business, due to running out of money in their business. And while there can be many reasons why they run out of money. Not checking to see how much money they have to spend before spending it. Can be a significant contributing factor to this reason why.

And while some business owners might not look at any financial information. Before they make financial purchases such as payroll or purchasing assets. Other business owners think they are doing it correctly.

Because they are looking at their bank statement. Before making financial decision. Thinking that that will help them make a more informed financial decision. However this is not true.

The reason why business owners who look at their bank statement. Will not be able to make a good financial decision. Is because there are many pending transactions going into and out of their bank account.

And if a business owner looks at their bank statement says Edmonton bookkeeping. They are not taking all of those pending transactions into consideration. Before they make a financial decision on spending money in their business.

A good example of this, is if an entrepreneur is looking at their bank account in order to determine if they have enough money in their business to run payroll. They may see that they have ten thousand dollars in their business. So they might think that they can run an eight thousand dollar payroll.

However, if they looked at a bank reconciliation instead. What the business owner might find. Is that even though it looks like they have ten thousand dollars. They have actually written five thousand dollars worth of checks.

And if they make that decision on running payroll. They will either because payroll to bounce. Or they will cause their check to bounce. And either way, they will end up running out of money in their business.

But if a business owner gets into the habit of looking at their bank reconciliation says Edmonton bookkeeping. They will see that they do not have enough money to run payroll yet. Which will allow them to make a business decision.

Such as what do they need to do in their business in order to ensure that they can run payroll. Perhaps they will engage in some revenue-generating activities. Such as sales calls, or increasing their online marketing spend.

Or, a business owner will engage in some collection calls to bring more money that they are owed into their business. So that they can make the financial decisions they need to keep their business running.

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It is extremely important for business owners to learn how to do bank reconciliations according to Edmonton bookkeeping. Because this is the document. That will help them make more informed financial decisions in their business.

Not only do business owners need to get into the habit of reviewing this before making any financial decision according to Edmonton bookkeeping. But they also need to ensure that they are doing the bank reconciliation accurately as well.

The first thing that they should do in order to start creating their bank reconciliation. Is take their most recent bank statement. And there last bank reconciliation.

Next thing that they will do, is ensure that the bank balance starting amount. Matches the statement balance of the bank reconciliation. What this will do, is ensure that there were no errors after the last bank reconciliation. That could affect its accuracy.

If there is a mistake. The mistake typically was because an entrepreneur entered a transaction for a future date that has already cleared the bank account.

Therefore, by fixing the date on the transaction. Will bring the bank reconciliation and bank statement back into alignment.

The next thing that business owners should do. Is cross off all of the transactions that have cleared the entrepreneurs bank account already. And they will be left with a list of pending transactions.

The next thing that a business owner should do, is ask themselves if these uncleared transactions are legitimate or if they are potentially mistakes. And by fixing the mistakes. Will ensure the accuracy of their bank reconciliation.

Mistakes could be entrepreneurs who have entered transactions in twice by mistake. Or entered in the incorrect amount. And they can typically determine which ones are most likely mistakes. Based on how long the transactions have been pending for.

For example, electronic transactions should never be pending. Because entrepreneurs will find out that there is a transaction when it actually clears their bank account. So if it is pending, it is because of an error.

But checks on the other hand, can take several weeks if not longer to clear. So business owners should keep that in mind when they are looking at the date of transactions.

But if the check has been outstanding for longer than six months. It automatically becomes void after that length of time. And so before a check get stale dated.

A business owner should contact the business that should be receiving the check. To verify first of all that they received it. And if not they can resend a new check.

But if they have received it and have not deposited it yet. They can encourage them to cash the check before it becomes stale dated.

By doing these things, entrepreneurs can ensure that they have the most accurate bank reconciliation. In order to make the most informed financial decisions in their business says Edmonton bookkeeping.