Learning how to properly reconcile a bank account is not difficult says Edmonton bookkeeping, but taking the time to do it consistently and properly every single month can be. That is the only explanation why more entrepreneurs do not consistently do this before they make any payments in their business. It is a vital checkpoint that business owners can use to ensure they have the money in their business in order to make the payments that they plan on. Business owners should get into the habit early on in their business ownership of doing bank reconciliations before they make any payments in their business so that they can avoid running out of money in their business. Out of all the entrepreneurs that fail in Canada, 29% of them say that running out of money was the reason why their business failed.
Learning how to do a bank reconciliation is more diligence than knowledge. In order for a business owner to do a correct reconciliation, all they need is to have the bank statements for the month that they are reconciling, a record of all of the checks that they have written, and the previous month’s reconciliation. Before they start, they should be looking at the ending balance of the previous reconciliation to verify that it matches the starting balance of their bank statement. If it matches, Edmonton bookkeeping says that they can start the reconciliation process for the current month. If it does not match, business owners should re-reconcile the previous month so that the two amounts match up.
After an entrepreneur enters all of the transactions for the month into the bank reconciliation, they will end up with the report that should show an entrepreneur the beginning balance, all of the cleared transactions, the incoming deposits, the ending balance, all uncleared balances, and the registered balance. All of the information is vital to verify how much money and entrepreneur has in their business.
Edmonton bookkeeping says that business owners should be especially aware of uncleared balances that appear on their statement. What uncleared balances are, are transactions that are scheduled to either come out of the bank account or go into it, but has not appeared in the bank yet. For example, an uncleared transaction that might be waiting for the point-of-sale machine to match at the end of the week can put all of the deposits into the bank account. Or, it could be that a check that a business owner has written that has not been cashed. Most uncleared transactions will only show up for a couple of days. Therefore if it appears on a report, business owners should keep an eye out for it. If it shows up on the report a second time, business owners should take steps to verify if it is an actual transaction that should be happening or if it is a mistake.
By learning how to do the bank reconciliation, and being diligent when doing it can help entrepreneurs have the best tools possible for knowing how much money they have in their business and how they can spend it.
If business owners are not aware of how important bank reconciliations are in their business, they may either choose not to do them or rushed through the process and not verifying the accuracy of the information says Edmonton bookkeeping. Therefore, it is extremely important that entrepreneurs understand why bank reconciliations are needed and why they should be careful when doing them. If a business owner is using their bank balance to make financial decisions, they could be setting their business up to bounce payments.
The reason for that is because any checks that they have written that have not been cashed can end up making a bank balance look like it has more money than it does. If a business owner has written a large number of checks, or if there have been a large number of checks that have not been cashed yet, it can cause they bank statement to look extremely different than the amount of money that a business owner actually has to use. This is where the importance of bank reconciliation comes in. Edmonton bookkeeping says that the bank reconciliation is a report that shows how much money that is in the business by taking into account all of the payments that are coming in as well as all the payments that are scheduled to go out. It gives an accurate picture of what the finances of the business are, and not how much money is in the bank account.
Business owners need to ensure that they are doing a bank reconciliation before they disperse any payments in their business. Whether it is writing vendors checks, or if it is running payroll, or even taking dividends out of their business, entrepreneurs should be getting into the habit early on in their business ownership of ensuring they have the money in order to make any payments. Because of how long it might take entrepreneurs to do bank reconciliations, they should minimize how many times they are doing bank reconciliations as well as how many times their dispersing payment. Edmonton bookkeeping says that if business owners can get into the habit of dispersing payments twice a month, the same amount of times that they pay their staff, they can seriously limit how often they need to do a bank reconciliation.
Not only should business owners be careful when they are doing their bank reconciliations, but they should also verify the accuracy of the information, and then review the report to at the end to ensure the information is correct. Doing so many checks is a vital part of doing bank reconciliation, because of how important is to ensure that an entrepreneur has the money to make the purchases or payments that they need in their business. By doing this on a consistent basis, business owners can avoid running out of money in their business, which is what has caused so many other entrepreneurs before them to fail.