The importance of bank reconciliations cannot be understated says Edmonton bookkeeping. It is extremely important that business owners get into the habit of not only doing bank reconciliations once a month but in fact to do a bank reconciliation every time they are about to make a payment or disburse cash in their business. The reason why this is important is that business owners should be getting into the habit of verifying how much money they have in their business before they make any payments. Not only should business owners get into the habit of doing this, but they should get to the habit of doing it carefully and in such a way that they are checking the accuracy of the information. If business owners are too rushed or do not understand the importance of it they may raise through the process, causing the report to have errors in it. If there are errors in the bank reconciliation, business owners are doing their business finances a huge disservice.
Business owners can use technology to help them ensure accurate bank reconciliations. While it is not necessary to use technology, Edmonton bookkeeping says that even standard spreadsheets like Excel can be used in order to do a proper reconciliation report, but business owners can improve the speed and accuracy of those reports by learning how to use technology to help.
QuickBooks Online is a great tool that business owners can use for more than just bank reconciliation. However, there is an automated feature in it that business owners can use to link directly to their business bank account. Every time a transaction happens in the bank account it updates QuickBooks online in real-time. Therefore, no matter when a business owner goes to do a bank reconciliation, the most accurate transactions have already been entered in.
However, business owners should understand that technology is not infallible, therefore they should be ensuring a double-check system can verify the accuracy of the information that is updated. If entrepreneurs wonder why they would bother automating if they still have to check, business owners should keep in mind that even by verifying the information, the automated process can ensure more accurate as well as faster reporting.
Once a business owner has automated the transactions in their software, in order to do their bank reconciliation, all they need is their bank statement, so that they can do the double check, a copy of all of the checks that they have written over the last time period, and the previous bank reconciliation. Edmonton bookkeeping says that even by using the most up-to-date technology, still will require business owners to have to manually look at information, to verify the accuracy and to correct errors.
By using technology to help the process, business owners can get into the habit of doing a bank reconciliation before dispersing any payments in their business, so that they can be confident that they have the money in their business in order to make those payments.
Not only is it important for entrepreneurs to get into the habit of doing Edmonton Bookkeeping and bank reconciliations before they disperse any money in their business, but they should also get into the habit of doing them carefully, and checking them at the start, in the middle and at the end. It is extremely important that these reports are as accurate as possible, not just so that business owners can have an accurate report that can help them make financial decisions in their business, but so that they can have the most up-to-date financial information for their accountant to do their year end statements with.
The reason why business owners should be using bank reconciliations instead of bank statements in order to make financial decisions, is because their bank statements even if they are using online banking will not show entrepreneurs the state of their finances taking into consideration all of the payments that are still uncleared. Edmonton bookkeeping says that bank reconciliations however will show that. Instead of looking at the bank statement and seeing that they have money to use, business owners are not taking into consideration checks that are yet to be cashed. By looking only at the bank statement instead of the bank reconciliation, nights cause a business owner to make financial decisions that will cause them to run out of money.
Entrepreneurs can use technology to help them reconcile their bank account, however it is not absolutely necessary. Edmonton bookkeeping says that even Excel spreadsheets can be enough technology that business owners need in order to have an accurate reconciliation done. However, using accounting software like QuickBooks online can automate the process in several ways, reducing the amount of manual data entry required, which can eliminate the element of human error from the process.
The bank feed feature in QuickBooks online allows business owners to sync up their bank account with the software so that every transaction that happens gets automatically entered. The matter when a business owner wants to do bank reconciliation, the most current transactions will be logged. All a business owner needs to do is quick verification to ensure there were no errors that happened during the automation process.
By getting into the habit of checking their reconciliation report before making any financial decisions can help business owners avoid the reason why many entrepreneurs before them have failed. Half of all entrepreneurs end up failing by their fifth year in business, and out of all of those entrepreneurs, 29% of them said the reason why they failed in business is because they ran out of money. By using bank reconciliations in their business, business owners can avoid making decisions that will cause them to run out of money in their business, which can help them make more prudent financial decisions including if they need to seek additional financing in order to help their business achieve their goals.