If entrepreneurs do not understand the importance of doing accurate bank reconciliation, Edmonton bookkeeping says that entrepreneurs might rush through it, not doing a great job, or fail to verify the accuracy of the information. The reason why that is a problem is that the bank reconciliation is an extremely powerful tool that business owners can use to ensure how much money they have in their business in order to make financial decisions. Also, it is what Edmonton bookkeeping companies use to create the interim financial statements for an entrepreneur. Because of the importance of this information, business owners should do what they can to verify the accuracy of the information.
The proper bank reconciliation does not need to take a lot of time, but it does need to be done carefully. Not only should entrepreneurs be doing it carefully, but they should also be doing it before they make any payments in their business whether it is dispersing payments to vendors, issuing payroll, were taking dividends out of their corporation. In order to minimize the number of bank reconciliations a business owner will need to do in a month, business owners should get into the habit of dispersing payments as a group once or twice a month, so that they only have to do bank reconciliations once or twice a month as well.
In order to do bank reconciliation, Edmonton bookkeeping says that there are really only three things that a business owner needs. They need the bank statements from the period they are reconciling, a record of all of the checks from the month that they are reconciling, and a copy of the previous period’s reconciliation. Having all this information, to get started a business owner needs to look at the ending balance of the last reconciliation, and compare it to the beginning of the current bank statement. By verifying that those two balances are the same, a business owner can be confident that they are starting off the bank reconciliation from the right spot.
If an entrepreneur finds that the previous bank reconciliation and the current bank balance starting amount do not match, it is extremely important that the business owner does the bank reconciliation for the previous month again. Even though this might seem like a waste of time, Edmonton’s bookkeeping says that this is an important step to ensure that the integrity of the finances from month-to-month is kept intact.
While it is very possible for entrepreneurs to be able to do a bank reconciliation using no more additional technology than an Excel spreadsheet, using technology can make doing bank reconciliations faster, easier and more accurate. Before business owners start using technology, however, it is recommended that they understand the importance of doing the bank reconciliation properly, and they get into the habit of doing it every single month as well as fact-checking it. By doing that consistently, business owners can graduate to using technology to help speed up the process.
While doing bank reconciliations is not difficult, Edmonton bookkeeping says if entrepreneurs do not do them well, or check the accuracy of the reports, they may end up with the tool that leads them towards making poor financial decisions that can negatively impact their business. Industry Canada says that half of all Canadian entrepreneurs fail within the first five years of business. 29% of those entrepreneurs say the reason why they failed was that they ran out of money. Proper bank reconciliation can be one of the tools that entrepreneurs use to ensure that they have the money in their business that they can spend. By not doing this properly, entrepreneurs could be putting their businesses at risk.
Despite the fact that there is lots of technology that exists to make bank reconciliations faster and easier, Edmonton bookkeeping says none of that will replace the need to review the statements for errors, and looking over the finished report at the end to verify the accuracy of the information. If a business owner can commit to consistently doing those two things, they should feel free to allow technology to help make the job even easier.
While entrepreneurs do not need to use fancy software, a favorite among many Edmonton bookkeeping companies is QuickBooks online. The reason why this software can help entrepreneurs is that it has a bank feed feature. What this feature does, is it allows the bank account of the business to be linked up to the software. For every bank transaction that happens, whether it is a debit credit, a cashed check, or a disbursement of cash, every time a transaction happens, QuickBooks online is updated in real-time.
Having this feature in QuickBooks online can help speed up the process of having all of the transactions entered into the software. This can make it easier as well as more accurate than entering the information manually. The biggest reason why is because human error can show up in all sorts of unexplained ways. However, Edmonton’s ten bookkeeping cautions business owners that despite the fact that this is an automatic system, business owners should take some of the time that they have saved through automation and double-check the accuracy of the information. Because the system is not a hundred percent accurate, business owners should be checking the accuracy of the information.
Once a business owner is all the information that they need to start their bank reconciliation, they need to verify the accuracy of the report and the way they would do that is to check the ending balance in order to verify that it matches the bank statement. Once they verified that is accurate, all they need to do is look at the registered balance in verify that matches the GL for the bank and the balance sheet. Once both of those match, that a business owner can verify that done the bank back properly, they can use the information to make decisions in their business.