Bank account reconciliation reports are an extremely important tool for business owners to get into the habit of using on a regular basis says Edmonton bookkeeping. The reason for this is because it can help business owners understand how much money they have in their business, and they should be looking at that report before they make any payments in their business. Running payroll, paying vendors, taking dividends themselves, or purchasing assets are all decisions that can be made easier and more confidently once a business owner knows how much money they actually have in their business.
Business owners should avoid getting into the habit of looking at their bank statements as a way of seeing how much money they have in their business. The reason why this is so dangerous is that while that might be how much money they have in their bank account, that is not taking into consideration any payments that are yet to clear. If business owners have written checks, or have schedule disbursements that are going to be coming out of their bank account automatically, that is not going to be shown in their bank statement. By thinking they have more money than they do, business owners might make financial decisions that could trigger bounced payments.
Technology can significantly help entrepreneurs do bank reconciliations faster and more accurately says Edmonton bookkeeping. Using accounting software QuickBooks online business owners can use a new feature called bank feed in order to automate the process of updating all of the bank transactions directly into the software. Business owners should be cautious however, that they do not rely on the accuracy of the automated process. This by no means replaces double checking all of the information. Despite the fact that business owners still need to take the time to double-check, this is still is a faster and more accurate way of doing bank reconciliation.
Not only should business owners be double-checking all of the transactions in their bank reconciliation, but they also need to be double-checking their reports at the end of the reconciliation to verify its accuracy. If they miss this step, Edmonton Bookkeeping says that they could actually cause next month’s reconciliation to be out as well. How a business owner would verify the accuracy of their report is to check the ending balance to verify that it matches the bank statement ending balance. If that is correct, business owners should take a look at the registered balance in the reconciliation report. If that matches the GL in their bank balance sheet a business owner can be confident they have done their bank reconciliation properly, and that they can then start making financial decisions in their business such as if they have enough money to run payroll if they can afford to make a dividend payment to themselves, or even if they can pay their vendors. It is extremely important that business owners get into the habit of doing this diligently so that they can always be confident in making payments in their business.
Small business owners often end up having to do most tasks themselves says Edmonton bookkeeping. From growing their business and marketing their company, to customer service and developing their product. Sometimes, a result of being so busy is that they get behind in some of their bookkeeping tasks. Business owners need to be extremely diligent and schedule their bookkeeping tasks into their schedule to verify that it can get done on a regular basis.
The reason why their bookkeeping tasks are so important says Edmonton bookkeeping, is because they can help entrepreneurs make financial decisions in their business that can help them make informed financial decisions and even avoid running out of money in their business. Half of all Canadian entrepreneurs end up failing in business before their fifth year, and 29% of those failed entrepreneurs say that running out of money in their business was the reason why they failed. By consistently taking care of their bank reconciliation can significantly impact the ability to avoid running out of money in their business.
Business owners can be very assured that it is not difficult to learn how to do a bank reconciliation. Edmonton bookkeeping says that they just need to be able to do it carefully to minimize errors. All of the information that a business owner will need in order to accomplish this feat is the bank statements for the period they are doing the reconciliation for, a record of all of the checks that they have a written in the period they are doing the reconciliation for, as well as the previous time periods bank reconciliation.
In order to start, Edmonton’s bookkeeping says that business owners should verify that the beginning balance of their bank reconciliation is the same as the end balance of their previous bank statement. This is to ensure that they are starting their new bank reconciliation exactly where they left off. If for some reason the balances do not match, a business owner needs to redo the bank reconciliation for the previous time period. Once a business owner has verified the balances match, and they have entered all of the transactions both bank transactions and checks that have been written, the bank reconciliation will show what the ending balance is. Verifying the accuracy of the bank reconciliation is an important final step to ensuring the accuracy of the information in the report. The looking at the ending balance and verifying that it matches the bank statement, if that is correct they can then ensure that the registered balance matches the GL on their bank statement. If to balances match, that a business owner can congratulate themselves on doing their bank reconciliation properly.
While it might seem like a big waste of time to some entrepreneurs to continue to check multiple times during the bank reconciliation, because of the importance of the information contained within, it is an important step that business owners should take in order to be confident that the results that the end of the report can be used to
make great financial decisions to avoid business owners running out of money.