Understanding the importance of financial statements including bank reconciliations can help business owners learn to consult those statements prior to making any financial decisions in their business says Edmonton bookkeeping. However, if entrepreneurs are not sure of all of the different ways to check for errors, they may end up with an accurate bank reconciliation that will not help them make good financial decisions in their business.
There are many ways that entrepreneurs can check the statements for accuracy, and the most common error is uncleared balances. Edmonton bookkeeping says that about 50% of their clients who are doing bank reconciliations themself end up with errors due to mistakes on the uncleared transactions. When they help business owners understand not only what an uncleared transaction is, but how to fix it, if it is air can help ensure the accuracy of these financial statements.
In order to understand what an uncleared transaction is, entrepreneurs need to understand what the purpose of the bank reconciliation is. This is to help business owners understand exactly how much money they have in their business to spend. It is going to take into consideration all of the transactions that a business owner has made and accepted into their business, that may not have clear their bank yet. For example, when an entrepreneur has made several thousand dollars worth of payments to vendors in the form of a check, and they have not to cash those checks yet.
An entrepreneur looks only at their bank balance to figure out how much money they have in their business, they often will end up thinking they have more money to use than they do, due to these transactions that have not cleared their bank yet. Therefore, when looking at their bank reconciliation, Edmonton bookkeeping says that it is very important for entrepreneurs to verify the accuracy of those uncleared transactions.
In order to look for errors, it is important that they understand how long it typically takes for various transactions to clear. Checks take the longest because they are typically sent out in the mail, and then however long it takes for the receiver to put those checks and the bank, and then wait for it to clear the bank. Bank card transactions only take a couple of days, and credit card transactions taking a couple to a few days to clear. Therefore, if a business owner sees these transactions have not cleared since their last bank reconciliation, they should find out why. Whether it is because the check has not been deposited, or if there has been an error such as entering the transaction and twice, or entering the wrong dates, can cause the transaction to appear uncleared on their statement. By fixing the error, the transaction disappears, and the report is accurate.
When entrepreneurs understand what common mistakes on the bank reconciliation report, they can check for accuracy, and fix mistakes themselves. However, if an entrepreneur finds that it is difficult, or they are having trouble finding the right time, Edmonton bookkeeping says that they can find great companies such as always bookkeeping to help them get up-to-date bank reconciliations prepared for them on a regular basis, so they never have to worry about making a financial decision with an accurate records again.
Edmonton Bookkeeping | What Are Uncleared Transactions On Financial Statements
One of the most common reasons why bank reconciliation reports have errors are due to uncleared transactions says Edmonton bookkeeping. There are many reasons why these transactions might persist on a financial statement, but it is very important that business owners ensure the accuracy of the information, so they can end up with accurate financial statements in their business. Making a decision off of the bank reconciliation with mistakes but it is their business at risk of spending more money than they have, which can cause an entrepreneur to run out of money in their business.
The reason why uncleared transactions are so dangerous on a bank reconciliation report is that if they have uncleared deposits, it typically makes the reconciliation look like a business owner has more money than they actually do. Therefore, it may because the business owner to spends more money than they have, which could bounce payments, and create all sorts of financial trouble for an entrepreneur.
On the other hand, if an entrepreneur has uncleared checks, it will make the bank reconciliation look as though they have to pay more money than they actually owe. This could also cause an entrepreneur from not making purchases that are important to help grow the business or cause them to fall behind on paying their bills or have to put their own personal money into the business to meet payroll. When all of these things could have been avoided by fixing the errors on their financial statements.
The most common reason for uncleared transactions to appear on the bank reconciliation and error says Edmonton bookkeeping is that they have either been entered into the accounting software twice, or they have been entered with the wrong dates. Once an entrepreneur fixes one of those two problems, the transaction will disappear off of the report and fix the balance.
It is not the only errors that can appear on the bank reconciliation, however, Edmonton bookkeeping says that these of the most common errors. Though business owners should also be diligent to ensure that deposits or expenses are not accidentally put into the shareholders’ loan account or related party accounts. Therefore, business owners should ensure their checking the entire financial statement to verify its accuracy, and not just looking for uncleared charges.
If entrepreneurs can learn how to review their bank reconciliation accurately, to fix all the errors, they will be able to make financial decisions confidently. However, if they find it is difficult, or time-consuming they may be better off by hiring and Edmonton bookkeeping company like always bookkeeping will be able to help them ensure the accuracy of their financial statements so that they can ensure that they can make those decisions confidently, and using the information to help their business grow.