Basic accounting for reconciling your accounts
Reconciling your bank accounts compares two different records in order to see if everything matches. This might be comparing your receipts to the information stored in QuickBooks or other accounting programs. Regardless of how you are comparing the two accounts, when running your own business, it is very important to go about reconciling cash accounts at least once a month.
One of the problems small business owners run into is not doing this often enough. If you fail to do this on a monthly regular basis, you run the risk of missing important financial discrepancies that might be taking place each and every month. These discrepancies can result in you missing out on important revenue or even running into tax issues as well. That is exactly why you need to go through the reconciling cash accounts process at least once a month.
Why reconcile your cash accounts once a month? Answer: validate the data entry. This is going to help locate potential data entry errors. It is possible to simply type in a wrong number when entering information, or you can completely miss a full transaction. This is going to drastically throw off your entire monthly statement and records, all of which are going to cause you problems later on. The more often you perform the reconciliation process, the easier it is going to be to spot these problems and avoid whatever sort of negative side effects might come about from it.
Confirm your banking statements are accurate. By doing this, you are going to see that everything in your software has been appropriately entered into your financial program. You are going to need a strong financial statement to reflect all of your sales and expenses. By going through all of your information, not only will you assure everything is correct but it also gives you peace of mind as well. Should you ever find yourself and your business audited (something that is common place for small businesses), you want accurate books.
Lastly, when you reconcile your accounts, you assure yourself an accurate tax report. The information you enter into your financial software is what you probably use to file taxes. You do not want to enter incorrect information into your tax return or other tax documents.
We hope you enjoyed the bookkeeping tips in this article!
LUXA Enterprises offers outsourced accounting services for small businesses in the Tulsa and surrounding areas. If you’re considering a short or long-term approach to outsource accounting, give us a call for more information at 918-928-7288.