Don’t Forget to Reconcile Your Accounts

What is Account Reconciliation and Why Does It Matter?

While it may sound like common sense, one of the worst things you can do as a business owner is not have a firm grasp on where your money is coming from or going to. Sure, you might have enough income to pay your expenses during a given month, but wouldn’t it be better if you didn’t have to worry as much about unforeseen items? That is where account reconciliation comes in. Typically a few days after the end of each month, it is a good practice to cross-check your general ledger with your checking account. But what’s the point, you may ask. Let us tell you.

Why Account Reconciliation Matters

Fraud & Unauthorized Transactions

Obviously we don’t want to point fingers, but this is probably the most important. Though it may not seem like a big deal if someone pockets money here and there, it will add up and it could potentially be the difference between you paying your obligations or going out of business. With that in mind, make sure you’re going through the statement line-by-line to see if there is anything that jumps out. This is especially something that is more recognizable for more established companies, because by now you understand that certain charges occur at certain times of the month.

Budgeting

As previously mentioned, you want to know that you have enough money in the bank to pay your employees, rent and any other items to keep your business running as smoothly as possible. By reconciling your accounts, you will not only have a better idea on when deposited funds actually clear and are available for use, but you can verify that you add enough zeros to make sure your customers have paid what they owe.

Fees

If you have a bank account where you are not charged for overdrafts and service fees, then kudos. Otherwise, there may be items that are reducing your available cash that you aren’t aware of. Be sure to pay attention to these items so that your financial statements are actually reflecting what your business has incurred.

For help with planning and conducting regular account reconciliation, get in touch today.