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When entrepreneurs nor is our first starting out says Edmonton bookkeeping. They may be able to quite easily make financial decisions by looking at their bank account.

The reason why they can do this. Is because there will not be a lot of outgoing or incoming transactions. Making it easier for an entrepreneur to look at their bank account balance. And understand how much of that money they can use.

However, as the business grows, and not only the number of transactions coming in and out of their bank account grows more numerous. The size of those transactions are also going to be larger.

Making it far more difficult for business owner to be able to look at their bank account in order to understand how much money they have.

This is where learning how to do a bank reconciliation is vital says Edmonton bookkeeping. Because this tool will help entrepreneurs understand how much money they have in their business to utilize. Once all of the pending transactions have cleared their bank account.

How an entrepreneur can do a bank reconciliation. Is first take their most recent bank statement. As well as their previous bank reconciliation. The first thing that they need to do, is to ensure that the starting bank balance matches the ending bank reconciliation balance.

This will ensure that they previous bank reconciliation was accurate. And there were no errors made in the interim. If there are errors, there is usually one reason why.

Edmonton bookkeeping says a business owner likely has posted a transaction into their accounting software. For a future date, and has marked it as being cleared.

An example of this, would be if an entrepreneur is reconciling July’s month. But have booked a August 8 transaction as being cleared.

By fixing this mistake, can align the bank statement and the bank reconciliation amount once more. Once an entrepreneur has verified that the two totals are accurate, they can proceed with the rest of the bank reconciliation.

The next thing that they need to do, is to look at all of the pending transactions that have actually cleared the bank account already. Such as checks that entrepreneurs have sent that have been cashed. Deposits to an ATM, debit and credit transactions, as well as electronic fund transfers and payroll.

What an entrepreneur will have left says Edmonton bookkeeping. Is a list of all the transactions that have not cleared the bank account, and are still pending. While an entrepreneur might assume that these are all the transactions that are still scheduled to come out of their bank account.

The next step, is for an entrepreneur to verify that there are no errors in these pending transactions. Duplicate entries, or if an entrepreneur has entered the incorrect amount could cause all of these transactions to show as pending when they are in fact errors.

By fixing the errors and the accounting software, can ensure that the amount of money that is left at the end of the bank reconciliation. Is all the money that an entrepreneur actually has utilize.

The sooner not nor can learn how to do this. The greater chance they will have at avoiding making financial decisions. That could cause problems in their business.

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Most entrepreneurs who open up a business have not experienced business ownership says Edmonton bookkeeping. And while the learning curve is quite steep, it is very important that entrepreneurs learn quickly.

The reason why, is because according to industry Canada, the failure rate for small businesses in Canada is extremely high. With 15% of all entrepreneurs feeling within the first year of opening their business. And 30% of small businesses failing within their second year of business ownership.

Half of all business owners will eventually fail, and will do so within five years. Making it an extremely high failure rate of businesses in Canada.

In fact, when industry Canada found this out. They did another survey in order to find out why the failure rate for entrepreneurs in Canada is so high.

What they discovered, was that there are three main reasons why entrepreneurs were not successful in business. The first reason, which caused 23% of entrepreneurs to fail. Is that they could not find or keep staff in their business.

The most common reason, causing 42% of entrepreneurs to fail. Was that business owners could not find enough customers to sell their products and services to.

However, 29% of entrepreneurs failed simply because they ran out of money in their business. And while there are many different reasons why. Spending money they do not have is a huge contribute infect or.

And what causes entrepreneurs to spend more money than they have. Can be if they do not look at their financial situation before making spending or purchasing decisions. Or, making financial decisions without understanding how much money they have to utilize in their business.

Many entrepreneurs think that they can look at their bank statement in order to see how much money they have to use in their business. However Edmonton bookkeeping says this is not true. Because it will not show them how much money they have once pending transactions have cleared.

A great example of this, is if an entrepreneur has ten thousand dollars in their bank account. But has written eight thousand dollars worth of checks.

If an entrepreneur looks at their bank account in order to understand if they have money to pay bills, run payroll, purchases or even pay themselves. They may make the assumption that they can spend ten thousand dollars in their business.

However, a bank reconciliation will help an entrepreneur understand that even though they have ten thousand dollars in their bank account. Eight thousand of that is spoken for. Meaning an entrepreneur only has two thousand dollars in order to spend in their business.

This can be so significant, that if more entrepreneurs were able to do a bank reconciliation. More entrepreneurs would be able to make more informed financial decisions. And could significantly avoid running out of money in their business.

If entrepreneurs like tips on how to do a bank reconciliation accurately. All they have to do is contact their accountant, or their Edmonton bookkeeping company. To have the process explained, so that they can be more successful in business.