When entrepreneurs start a business for the first time says Edmonton bookkeeping. They have a steep learning curve on their business finances. Because they typically of never operated the business before the one that they have just opened.
While the learning curve is very steep, there are some important things that entrepreneurs should learn first. In order to help them not only make the best financial decisions possible.
But can help them avoid making decisions that might put their business at risk. For example, industry Canada says that while 50% of all business owners fail within five years.
29% of these failed entrepreneurs say that running out of money. Is the reason why they were not successful in their business. Making running out of money the second most common reason why Canadian entrepreneurs fail every year.
Business owners can avoid spending more money than they have and end up running out of business. If they simply learned how to do bank reconciliations.
The reason why, is because a bank reconciliation will show an entrepreneur how much money they have in their business. Once all of the pending transactions that they have in their business clear their bank account.
While many business owners think that they can find this information note simply by looking at their bank statement. Edmonton bookkeeping says their bank statement will show them exactly how much money they have in their bank at that given moment.
But what it will not show entrepreneurs, is how much money they have once all of their various transactions have cleared. Such as checks that they have written, or payments they have made either through debit or credit. For electronic fund transfers that they are waiting to clear.
The busier a business gets says Edmonton bookkeeping. The more transactions both in and out of their anchor account they will have. Make it more and more difficult for an entrepreneur to look at their bank account. In order to figure out how much money they have to use.
And if an entrepreneur looks at their bank reconciliation. Prior to making any financial decision. Such as whether they have enough money to run payroll, pay bills, or purchase assets.
They will be able to understand if they have the money to make those decisions. Or, if they do not have enough money. And they need to generate more revenue or engage in some collection calls. To bring more money into their business to be able to do those things that they need and want to do.
One of the first things that entrepreneurs need to understand, is that the different transactions that are pending. Will take different amounts of time depending on the type.
For example, checks will take the longest to clear. Because they are typically sent in the mail, and then it requires the person who receives the check depositing it into the account. If they do not deposited for three weeks, then it will be outstanding for at least that amountof time, if not longer
By understanding that pending transactions can impact their final bank balance. Entrepreneurs need to understand that this is why they should learn how to do bank reconciliations.
And the sooner they learned this, the sooner they will be up to spend that money without fear of spending more money than they have.
What will it take to get decent Edmonton Bookkeeping around here?
Business owners need to understand that bank reconciliations are an important tool in their business says Edmonton bookkeeping. In fact, it should be one of the first things that they learn how to do. So that they know how much money they have to spend in their business.
The reason why, is because all of the various pending transactions that an entrepreneurs has their business. Such as waiting for checks to clear, debit or credit transactions to show up. As well as things like electronic fund transfers, that may be scheduled for later on in the month.
All of these things can impact how much money and entrepreneur has in their bank to use. Each is why entrepreneurs should not be looking at their bank statement in order to make financial decisions.
And while doing a bank reconciliation. Can help ensure that an entrepreneur knows how much money they have in their business. It is also important way to verify their are no mistakes in their accounting software. By verifying any transactions that are still pending.
The reason why, is because if the transaction is pending. It could be that it is because it has been twice says Edmonton bookkeeping. And the first transaction has actually cleared the bank account. But the second one, which is an error will never clear.
Therefore, this is why business owners need to ask themselves any time they see an uncleared transaction. If this is a mistake, or a legitimate transaction that is waiting to clear.
One clue that entrepreneurs can use to verify this. Is looking at the length of time these transactions have been uncleared for. A great example of this says Edmonton bookkeeping. Are electronic transactions.
There should be no electronic transactions that are pending ever. Because the moment they show up, it is because they are already in a business owner’s bank account. So if an entrepreneur sees an electronic transaction outstanding for even one or two days. This is typically a mistake that needs to get fixed.
Another example is a check that is waiting to be cleared. While it can take several weeks to clear a check. Especially because they are typically sent by mail. And then require the person on the other end depositing that check into the bank account.
Business owners need to keep in mind any checks that have been outstanding for six months or more. The reason why says Edmonton bookkeeping. Is because once checks have been written for six months. They become stale dated. Which means they are no longer valid to be cashed.
If entrepreneurs and sees checks that are waiting to clear for this long. It is either a mistake that needs to be fixed. Or perhaps there vendor lost the check or never received it in the first place.
Which is why entrepreneurs should look at those transactions, and verify if they are a mistake that needs to get fixed. Or if they should contact their supplier.