22: Is Reconciling Your Bank Account Really Necessary If You Have A Small Business, Are Self-Employ
22: Is Reconciling Your Bank Account Really Necessary If You Have A Small Business, Are Self-Employed, A Solopreneur, Entrepreneur, Small Business Owner, Virtual Online Bookkeeper, Virtual Assistant Or VA
Fill out the Contact Us form if you are a small business owner looking for a qualified bookkeeper:
Sign up for a quick chat to see if starting a Virtual Online Bookkeeping Business is right for you:
Grab Your FREE guide: 5 Essential Strategies For Stress-Free Bookkeeping:
Your FREE Online Virtual Bookkeeping Business Starter Guide is waiting for you:
If You Have Or Would Like To Start A Bookkeeping Business, Join My Founding Members:
Join Our Facebook Community: https://www.facebook.com/groups/womenbusinessownersultimatediybookkeepingboutique
QuickBooks Online - Save 50% Your First 3 Months:
Show Notes:
Welcome Back…On a typical month, are you the business owner who gets their bank statement, whether in the mail or online, and you open it right away and check your balance, or are you the business owner who doesn’t even open the envelope? Do you check your bank balance daily online or do you just hope and pray you have enough cash for all the expenses your business incurs? Regardless of how you handle your day-to-day bank account interactions, I want you to know how important it is to reconcile your bank statements. I am going to personally recommend you do this on a monthly basis, but I get it. I know life gets busy, and to be totally honest with you, there have been a few – not many – but a few months where I was unable to reconcile my own business bank accounts on a monthly basis. Yep, I said it…even I, as a Certified Public Accountant who does bookkeeping for multiple clients, am not perfect when it comes to doing my own bookkeeping. But, when it comes to my clients, you know that’s going to be a different story. I always make sure their work gets done on a timely basis because I put their work as a higher priority on my list of things to get done. How does that story go…the cobbler or shoemaker’s children have no shoes? I know you know what I mean. Anyway, getting back to today’s topic, I am going to let you know why I feel reconciling your business bank accounts on a monthly basis is so important.
The main goal when reconciling your bank statement is to make sure your books match what the bank is showing for transactions on your bank statement. When you have a small business, you want to make sure you are reporting ALL of your income and expenses, and when you are using a business checking and credit card account, this ensures these transactions are being tracked and will show up on your statements. This is why you will hear me say how important it is to have a separate bank account for your business. When you reconcile your accounts, you make sure you are accounting for all the income and expenses in your business. It is such a good way to give yourself the confidence that your books are accurate.
Reconciling your bank accounts will allow you to confirm all the transactions that show up on your bank statement have been recorded in your books, and vice versa. When you do this, you may find there are periodic bank charges, overdraft fees or automatic deductions that show up on your bank statement that you may have missed recording in your books. You will find any discrepancies between your books and the bank account when reconciling. If you accidentally record a transaction that should have been recorded as $2100 as $1200 just by simply transposing the numbers, that’s a $900 error. These errors can be made easily and is just another reason you are looking for differences between your books and the bank statement. The quicker you find these differences, the more reliable both of these balances will be. When you have reliable amounts, you can eliminate any of those overdraft fees which can really add up. Let’s be honest, if the only reason you are getting overdraft fees is because you were unaware of your bank balance and if you had the right information you could easily prevent these fees in the first place, why not keep that hard earned money in your pocket rather than giving it to the bank.
Whether you are using something like QuickBooks to record all your transactions, or you are using the tried and true check register, you can reconcile your bank statement. Keeping track of your money coming in and going out of your business account can be done many ways. The goal here is to just do it. Once you have finished reconciling your bank and credit card accounts for your business, you know your information is accurate and your financial statements reflect reliable information. Not only will you feel confident in your numbers, you will also know that you can provide accurate information in regards to your income and expenses when you file your tax return.
Remember when I asked earlier if you were the type of business owner who checks their bank accounts on a daily basis to see what your cash flow looks like? Well, if you are reconciling your bank statements each month, you can also start trusting the information you have in your books…and actually, your books could be even more accurate than your online bank balance. Why, you might be asking? Well let’s take for instance you write out a large check to one of your vendors. When you are looking online to get your bank balance, if this check hasn’t cleared the bank yet, you could be setting yourself up for a big surprise when that check actually clears. When you look at your book balance and that check is already deducted from your book balance, you will see the “true” balance and you will know exactly how you are sitting with your cash flow. This happens more often than you would think, and it is easy to forget about a transaction if you are not recording it.
I want to touch on bank feeds a little bit today too. If you are using a computerized software system such as QuickBooks Online, and you have it set up to allow bank feeds to import directly into your books, this is a very efficient way to get your transactions into your books. With literally a click of a button, your information is recorded, so you might be thinking there is no reason to do your bank reconciliations if you have the bank feeds coming in, right? Wrong. I have seen many times when a bank feed gets added into a client’s books more than once, or a group of transactions gets missed. If the transactions are imported into your file more than once, there is a possibility you could be overstating your income or even overstating your expenses. Overall, when you reconcile your bank account, you will catch any errors like this and are able to get it fixed quickly.
Lastly, let’s talk about fraud or theft. If you never look at your bank statements to validate the withdrawals are correct, you could easily have fraudulent amounts showing up and you would never even know it. Nobody wants this to happen, but unfortunately, it does. I’ve had clients who have had odd amounts withdrawn from their checking accounts and strange transactions show up on their credit card statement that they have no clue how they got there, or who generated the transactions. When you look over and reconcile your bank accounts on a monthly basis, you are able to catch these amounts and notify your bank or credit card to have the transactions stopped, or even disputed and have the funds added back to your account. The key to these issues is “timely”. If you don’t find these transactions out until months down the road, you will have a harder time trying to get those funds back.
Remember that question I mentioned I was going to ask? Actually, I want to ask two questions. I have been receiving comments from small business owners just like you who are struggling to find a bookkeeper who can help them with their bookkeeping. I am wondering if this is something as a small business owner you are struggling with as well. If you are looking for a qualified bookkeeper you can trust to help you with a small portion of your bookkeeping, or maybe you are looking for a bookkeeper to take over doing all of your financial statements, please let me know. You may already be aware that I also coach entrepreneurs who want to start their own virtual bookkeeping business and if there is enough interest, I would love to provide a service to link you as a business owner with the entrepreneurs who go through my coaching program who have the knowledge and skills necessary to help you ensure your bookkeeping is accurate and up to date. Mastering your small business finances doesn’t necessarily mean you, as the small business owner needs to do all the work yourself, it simply means you put systems in place to ensure you have timely and accurate information to make smart business decisions. Please email me at Info@FinancialAdventure.com and let me know, I always personally respond to all my emails and I will keep you up to date on the progress of this service. Also, if you are thinking about starting a bookkeeping business, or are looking for additional clients for your existing bookkeeping business, you can go to www.FinancialAdventure.com/discovery to set up a call with me so we can make sure you have the proper knowledge and skills to help small business owners with their bookkeeping. If you are qualified, I will add you to my list of available bookkeepers. I see a huge disconnect here and I want to help both you as a small business owner looking for a trusted and qualified bookkeeper and the bookkeepers looking to help small business owners and have the availability to take on additional clients.
And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.
Comments