Many entrepreneurs may not understand how important it is to do bank reconciliations says Edmonton bookkeeping. However, with 29% of all entrepreneurs feeling because they ran out of money, this is a necessary habit for business owners to form. Reviewing bank reconciliations can help entrepreneurs understand how much money they have in their business, and by looking at that report prior to making any financial decisions both big and small, can help entrepreneurs avoid making decisions that could cause their business harm. Therefore, learning how to do an accurate bank reconciliation is extremely important.
The reason why a bank reconciliation is so important is that a bank statement alone is not going to show any entrepreneur how much money they have to use. Pending transactions can cause the bank statement to not be of an accurate reflection of the money that an entrepreneur has to use. By doing a bank reconciliation on a regular basis, and verifying the accuracy of it, can help aid an entrepreneur in making informed financial decisions in their business.
In order to do proper and correct bank reconciliation, an entrepreneur simply needs to ensure that they have their bank balance, statements from their bank accounts and credit cards, and record of all of the checks written in the previous month. All an entrepreneur has to do according to Edmonton bookkeeping is enter this information into their accounting software, in order to end up with a bank reconciliation report. In order to start, an entrepreneur should verify that their previous reconciliation report and where their current bank statement starts. By doing this first step, entrepreneurs can ensure that they are starting the reconciliation properly. If these totals do not match when they start, an entrepreneur will not end up with an accurate report, no matter how careful they are.
Once they have this accurate report, a business owner should end up with their beginning balance, clear to transactions, incoming deposits, ending balance, and uncleared balances. The most important thing to pay attention to is the ending balance because that will tell business owners how much money they have to use in their business and uncleared balances. The reason why this is important is that this is the most common area for mistakes to occur, and business owners need to check this area when they have completed their bank reconciliation to verify that there are no errors.
Once an entrepreneur has done a bank reconciliation, and verify there is no errors, they can use that information for the next couple of days to make financial decisions in their business. If they find however that they are unable to find the time to run a bank reconciliation, where they are nervous about the accuracy of their report, they should ask their Edmonton bookkeeping company like always bookkeeping for help, to verify the accuracy of their report, or simply to do the bank reconciliations a couple of times a month so that an entrepreneur can ensure they have an accurate report in order to help them make informed financial decisions in their business.
Edmonton Bookkeeping | How To Verify The Accuracy Of Financial Statements
By understanding how important bank reconciliation is, business owners can ensure that not only are they creating the report regularly, but they are also as diligently checking for errors says Edmonton bookkeeping. If business owners do not check for errors, and inaccurate report is just as detrimental to their business as not pulling the report at all will be. Therefore, business owners should ensure that not only are they taking the time to run this report, they are also taking the time to verify its accuracy as well.
Why a bank reconciliation is so important, is because it is going to help an entrepreneur understand how much money they have in their business after all the pending transactions are taken into consideration. Therefore, they need to verify the accuracy of all pending transactions. Not only is this important, because pending transactions are the most common error that exists on bank reconciliation reports. And if this report has uncleared transactions, a commonly makes it look like an entrepreneur has more money than they actually do in their business. This is why an inaccurate bank reconciliation report can cause an entrepreneur to make financial decisions that would end up causing an entrepreneur to potentially run out of money in their business.
In order to verify the accuracy of pending transactions, an entrepreneur needs to understand why they might be pending in the first place. The checks, that is the most common uncleared transaction, because usually an entrepreneur since the check by a male so it takes a while for the vendor to get it, and then they have to wait until they deposit that in the bank, and then it clears the bank account. Checks can take a couple of weeks to even a couple of months to clear. Edmonton bookkeeping says bank card transactions and credit card transactions can take anywhere between 1 to 5 days to clear, depending on when that transaction happened. A credit card transaction happening on a Friday night before a long weekend might take up to a week to clear the bank for example. Edmonton bookkeeping says that if entrepreneurs see electronic transactions pending, they should understand that it is an error because electronic transactions take no time to clear, they are deposited immediately into and out of the bank account.
Common reasons why uncleared transactions are mistakes is if they have been entered twice, perhaps entrepreneur entered an invoice, and then received a statement and entered it again. For, an entrepreneur entered the date in improperly. By checking transactions that have been pending for longer than normal, an entrepreneur can check for those errors, and fix them, causing them to drop from the report and allowing the reports to be accurate.
By looking for obvious errors, and knowing how to fix them can ensure that an entrepreneur ends up with a bank reconciliation report that is accurate, that they can use to make informed financial decisions in their business. If they have any questions, they can contact their Edmonton bookkeeping company such as always bookkeeping to get advice on what to do to end up with accurate statements.