Business owners often have many tools at their disposal that can help them make informed decisions in their business says Edmonton bookkeeping. A bank reconciliation is one of those tools, and what decision it helps entrepreneurs with is making informed financial decisions. It helps the business owner understand how much money they have in their business, so they do not end up spending more money than they have, which could cause them to run out of money in their business. With 50% of all entrepreneurs ending up failing, and 29% of those entrepreneurs saying the reason why they failed was running out of money, this is an extremely important report for business owners to use.
If a business owner does not know what a bank reconciliation is, or if they think they are going to be able to find out how much money they have in their business to use by simply checking their bank balance, they could be putting their business at risk. While their bank balance is going to show a business owner exactly how much money they have in their bank at that exact moment in time, but it will not tell them, is how many pending transactions they have, that is going to take money out of their account within the next few days. A bank reconciliation report however will.
Because a business owner may have many transactions, or they might have vendors who have not cashed checks yet, it is very dangerous for an entrepreneur to think that they will be able to look at their bank balance to know how much money they can use. Therefore, learning how to create a bank reconciliation report is extremely important for entrepreneurs. They should get into the habit early on of creating this prior to any financial decision in their business whether it is paying bills, staff or even themselves. However, it is not just important for entrepreneurs to ensure they are creating this report, they also need to know how to review it for accuracy, so that they can ensure it is going to allow them to make those decisions without putting their business at risk.
In order to end up with accurate bank reconciliation, business owners need to understand what transactions could be pending, that could end up clearing the bank later. Edmonton bookkeeping says that checks are the most common uncleared transaction, but also any transactions using a bank card or credit card also can take a few days to clear, depending on when they were made. Therefore, when an entrepreneur sees these transactions in their report, they can look into whether these are actually pending, or if there are errors. However, if an entrepreneur sees that there is an electronic charge that is uncleared, they should be able to tell that that is an error immediately because electronic transactions do not need any time to clear because of their deposit immediately in the business.
By understanding the importance of running regular bank reconciliations, as well as what to look for to verify the accuracy of the information, business owners can get into the habit of having a accurate and powerful tool that can aid in their financial decisions in their business. By looking at this report before making any decisions about money can help entrepreneurs ensure that there maintaining the integrity of their business is wealth.
Edmonton Bookkeeping | What Is A Bank Reconciliation
If business owners are not aware of what a bank reconciliation report is, they may not understand why it is important to run the reports prior to making financial decisions says Edmonton bookkeeping. They may believe that looking at their bank balance is going to give them enough information to make financial decisions, but if they do that, business owners might be putting their business at risk of running out of money. Therefore, not only do business owners need to learn how to run bank reconciliations, but they also need to learn how to verify the accuracy of them as well.
In order for an entrepreneur to ensure that their financial statements are as accurate as possible, they need to be starting those reports properly, to ensure the accuracy of the information. Edmonton bookkeeping says that the first thing that they must do is check their statement balance in order to ensure that the beginning balance is the same as the end of the previous statements. If it does not match, the bank reconciliation will not balance out. However, it is a very easy fix if it does not match. All the entrepreneur needs to do is re-reconcile the previous bank reconciliation, and their statement balances will match.
When a business owner is starting the process of their bank reconciliation, what they need to do is gather all of the important information. They need to their bank account balance, all bank and credit card statements, and a record of all checks written in the month. In order to have all of this information, business owners need to ensure that there keeping good record of everything financial. Then, Edmonton bookkeeping says that they just have to enter this information into their accounting software, and that will create their reconciliation report.
Once they have completed it, Edmonton bookkeeping says their bank reconciliation will show them what their beginning balance is, all transactions that have cleared the account since last report, all incoming deposits, the ending balance and the uncleared balances. It is very important that business owners pay special attention to the uncleared balances. Not only is this the most common air that entrepreneurs will have on their bank reconciliation report, but it can be very easy to detect if a business owner knows what to look for.
Uncleared deposits will make it look like an entrepreneur has more money than they actually due, which is a very dangerous thing in a bank reconciliation, especially if an entrepreneur is using it to figure out if they can make purchases. And an uncleared check will make it look like an entrepreneur owes more money than they are actually due, which might cause them to avoid spending money that they actually can afford, which might end up with them stalling the growth of their business.
By understanding how to do accurate bank reconciliation, and how to troubleshoot for errors, can help an entrepreneur ensure that they have the most accurate reports so that they can make informed financial decisions in their business. However, if a business owner finds that they are struggling with this, the best course of action might be to hire in Edmonton bookkeeping company such as always bookkeeping, so that they can get professional help to ensure that they have the most accurate information possible to make good financial decisions in their business with.