When an entrepreneur is brand-new in business, they may be able to keep track of all of their payments and financial transactions says Edmonton bookkeeping. This will sometimes pull them into a false sense of security that they are going to always be able to review their bank statement in order to know how much money they have to use in their business. However, as their business grows, and they get busier with the transactions both into and out of their bank account, this becomes more difficult and often impossible. Therefore, having accurate financial statements becomes more important to entrepreneurs in order to make informed financial decisions in their business.
If entrepreneurs believe that they can simply look at their bank balances in order to understand how much money they have, the more transactions they have a pending, make it more difficult to understand how much money they have. It is impossible for a business owner to be able to always know which checks have been cashed and cleared, and how many transactions are incoming into their business at any given time. However, bank reconciliation is a report that is going to be able to tell an entrepreneur exactly how much money they have to work with after all of those pending transactions are taken into consideration.
By learning how to run a bank reconciliation, an entrepreneur is able to use that information confidently to make financial decisions in their business both big and small. Whether it is running payroll, paying bills, paying themselves and even purchasing assets to help their business grow, the business owners should ensure that they are consulting their bank reconciliation prior to making this decision to verify that they are not causing their business to run out of money.
Business owners should get into the habit of running bank reconciliations whenever they disburse funds, and they can organize that so it happens only twice a month, to minimize the number of bank reconciliations they need to do. Since entrepreneurs should be running this report before any transactions, it can save time by grouping together all cash disbursements, so that they only have to do a bank reconciliation once. Since entrepreneurs are typically running payroll twice, by doing all cash disbursements alongside payroll, can help a business owner ensure that there running a bank reconciliation twice a month says Edmonton bookkeeping.
An entrepreneur will enter the following information into their accounting software to end up with a bank reconciliation: their bank account balance, their bank and credit card statements, and checks that have been written in the previous month. By entering this information into their accounting software, they can end up with the bank reconciliation that will tell them how much money they have to use in their business.
Even by learning how to create efficiencies, if entrepreneurs find that this is difficult, or they are not confident in the reports accuracy, they can always contact and Edmonton bookkeeping company such as always bookkeeping to help them get timely and up-to-date bank reconciliations that can help them make informed decisions on a regular basis.
Edmonton Bookkeeping | The Importance Of Financial Statements
Not only is it important for entrepreneurs to understand how important bank reconciliations are says Edmonton bookkeeping, but how to check these reports for accuracy as well. If entrepreneurs do not check these reports for mistakes and use them to make financial decisions, they could be making poor decisions, because the statements were not correct. Therefore, and addition to learning how to run a bank reconciliation, business owners also need to know how to check for errors and fix them.
The first place to start is by ensuring that the statement balance matches the ending of the previous balance. Edmonton bookkeeping says that this is extremely important, because if these two totals do not match, the entire rest of the reconciliation report will not be accurate. Therefore, an entrepreneur needs to be diligent and ensuring that they are starting accurately.
The most common error that business owners will have on their bank reconciliation is in the pending transactions. In order to check for errors, an entrepreneur should understand that any transactions other than checks that are pending for more than a couple of weeks, is most likely an error. For example, bank card and credit card transactions take anywhere between one and five days, depending on when the transaction was made. A transaction made Friday night of a long weekend might take five days to clear, whereas a transaction Monday morning at nine could clear the same day. Also, if entrepreneurs see that there is an electronic transaction that spending, that is an automatic error because these transactions clear immediately.
Common reasons for these errors says Edmonton bookkeeping are if an entrepreneur has accidentally entered them multiple times, or if an entrepreneur has made an error entering the date. Either by transposing month and day, or just hitting a wrong number button. By fixing these errors, transactions clear and disappear from the report. The reason why it is important to clear these transactions is that they can actually make the bank reconciliation show that an entrepreneur has more money to use or less money to use. Therefore, it is very easy that these transactions can end up causing a business owner to make bad financial decisions, thinking they have more money in their business then they do.
By knowing what uncleared transactions look like, and how to clear them can help entrepreneurs ensure that they are bank reconciliations are accurate as often as they need to run them make financial decisions. However, with how important this report is, if business owners find that they are running out of time to run a report, or if they are not confident in their ability to have an accurate report, it is and that entrepreneurs best interest to contact Edmonton bookkeeping company always bookkeeping in order to hire them to do accurate bank reconciliations for them. That way, an entrepreneur can be confident in ensuring any financial decision they make is going to help their business.