Not only is it important for entrepreneurs to get into the habit of repairing bank reconciliations prior to making any financial decisions says Edmonton bookkeeping. But is also important that entrepreneurs get into the habit of reviewing those reports regularly for accuracy. Incorrect financial statements are just as dangerous to make financial decisions on than having no financial statements at all. Since one 9% failed entrepreneurs say the reason why they failed is that they ran out of money, this is one significant way that entrepreneurs can avoid falling victim to that fate.
In order for an entrepreneur to understand how important it is to review their bank reconciliation for errors, they should understand why it is important to have a bank reconciliation in the first place. in order for an entrepreneur to understand how much money they have in their business to spend and use as they see fit, they should know what all the pending transactions are that they have both into and out of their business, and how that looks up when applied to their bank balance. If an entrepreneur is simply looking at their bank balance alone, they may think they have more money than they actually do, because there are several transactions waiting to clear.
Also, an entrepreneur needs to understand that transactions that are unclear are the number one way that bank reconciliations have errors in them. If the entire reason an entrepreneur is creating a bank reconciliation, is to see uncleared transactions, they should verify that those transactions are accurate. Edmonton bookkeeping says that if entrepreneurs are using bank reconciliations to make financial decisions in their business if they are not fixing errors prior to finishing the report, they are ending up with a statement that has incorrect information in it, and will not help them make financial decisions in their business.
So once an entrepreneur understands the importance of bank reconciliation, and the importance of troubleshooting it, entrepreneurs can be prepared to doing an accurate report, to use in their business. The first thing that they should do to start this process, is verify that they are starting bank balance matches they are ending previous bank reconciliation balance. If they are not verifying the accuracy of these two totals, no matter how accurately they enter information into their accounting software, the reconciliation report will be incorrect. If it is incorrect and does not match, all an entrepreneur needs to do is re-reconcile the previous balance, and that will get both amounts to match. The reason why this is necessary is if additional transactions were posted after the last reconciliation.
Edmonton bookkeeping says the next thing that an entrepreneur needs to do once they have verified that these are accurate, enters all of their information into their accounting software. That information would be their bank balance, bank and credit card statements, and all checks that were written in the previous month. By entering all this information into their accounting software, entrepreneurs will end up with bank reconciliation.
Edmonton Bookkeeping | It Is Important To Review Financial Statements For Errors
It is very important that entrepreneurs get into the habit of checking their bank reconciliations for errors, because as Edmonton bookkeeping says, and incorrect bank reconciliation is as dangerous to an entrepreneur to make financial decisions with as if they did not check anything at all. In fact, there are common errors that can exist on bank reconciliations, and if entrepreneurs understand what these errors are, they will be able to catch those mistakes and fix them in order to end up with accurate statements to make decisions with.
The most common errors are uncleared transactions that mistake. In order to understand how uncleared transactions can be air, entrepreneurs should understand what causes them to be uncleared in the first place. Since a bank reconciliation is essentially a report showing an entrepreneur what money they have to use based on how much money they have their bank my nest all of the transactions that are waiting to clear. Examples of uncleared transactions are checks that an entrepreneur has sent out, but is not been cashed, bank card or credit card transactions that have not been posted are the two most common.
In order for an entrepreneur to understand how these will look if they are in error, an entrepreneur also has to understand how long it typically takes these transactions to clear. Bank card and credit card transactions can take anywhere between 1 to 5 days to clear, depending on when those transactions were made. For example, entrepreneurs made those transactions in the evening, or on a long weekend, may find that it takes a longer time to clear that if they made it during business hours a week. However, if an entrepreneur finds of these transactions are waiting to clear for one or two weeks, this is typical because there is an error.
How to check and verify the accuracy of uncleared charges, is by looking at the date to verify the data is correct, and to verify that it has not been accidentally entered twice. These are two common errors says Edmonton bookkeeping, that can cause uncleared charges to appear on the statement. If it is an electronic transaction, it is automatically flagged as an error, because electronic transaction should appear in an entrepreneur’s bank account immediately.
Checks, on the other hand, might take a lot longer to clear, because they are typically mailed, and then a business owner has to wait until the person who received them puts them in the bank. This might take a couple of weeks or even a couple of months. When entrepreneurs see checks uncleared for longer than a month, they should contact the recipient to verify that they got it, and to ask them to cash the check, so that it does not get stale dated.
Edmonton bookkeeping says that by doing this, entrepreneurs can ensure they end up with accurate financial statements so that they can make informed decisions in their business. However, if they find that they are struggling with doing bank reconciliations regularly, or fixing mistakes, they should contact always bookkeeping, to asked them to do it on their behalf, so they never have to worry about when they are going to do bank reconciliations, or worry about their accuracy.