One of the most recurring themes I have noticed as a bookkeeper is most business owners have not reconciled their bank or credit card accounts. I think this is due to the fact that some of them may not understand how powerful a simple task like this is AND how much information it can tell them about their businesses.
Here are 7 reasons why this task is so crucial to the overall financial health of your business.
- Errors - Performing a reconciliation of your bank accounts every month can help locate errors made by you or the bank. Not to mention can catch illicit transfers performed within your accounts. This is especially essential if you have set up bank feeds in your accounting software.
- Prevention - Unauthorized charges by the bank, check fraud, and other serious issues can be identified AND corrected. Miscellaneous charges and large, out of the ordinary purchases are some prime examples.
- Powerful Decision Making - When you know where your money is coming from and where it is going, when you know all transactions are accurate and that balances are correct, you as the owner can make some very powerful decisions in regards to your company. You can determine if that new office building is obtainable for starters.
- Financial Fitness - Performing a bank reconciliation is like going to the doctor for a regular checkup. With frequent monitoring, any issues that arise can be solved quickly before things get out of hand. And it is a great, built in checks and balances to ensure all transactions have been recorded.
- Saves Money - Bank errors can sometimes mean thousands of dollars are misplaced leaving your account in dire straits. Transposition of numbers when entering a check is an example of how large sums of money can be misplaced by the bank. (This is rare).
- Mitigating Risk - When errors are found and reported to the bank in a timely fashion, the financial risk is transferred from your company to the bank. Translation: You do not have to pay for their error.
- Peace of Mind - There is no substitute for the relief knowing that your finances are accurate and every income item and expense transaction is accounted for.
Double deposits and checks still outstanding 1 year after being mailed? All of these issues can be identified with frequent account reconciliations. With online banking being what it is today, business owners, you know longer have to wait until the month is over and you are mailed a statement to reconcile. You can simply log in to your online bank account and download transaction data to reconcile daily or monthly; giving you faster response time on catching errors and fraudulent activity.
For more information on the power of reconciliation, schedule a consultation or email us at [email protected].
AMH Bookkeeping, LLC. Your books. Clean and simple.