Reconciling Financial Data helps you “see” your spending.
When it comes to your business, reconciling your financial records is not only key, it is necessary. Reconciliation is the process of comparing transactions you have recorded against your bank and/or accounting records. Think of reconciliation like the game of “Match,” where the image on the one card you turn over must match up perfectly to the image on the other card. If they do not match, you must start over.
You must ensure that your records are in agreement; always and without any discrepancies. The stability of your business and/or your personal financial records relies on your diligence and attention to the matter of reconciliation.
Why is reconciliation important?
Ensuring that your financial matters are in order, and match up to the penny, is important because it helps to ward off any potentially fraudulent activity. If you’re not paying attention, how would you know if your account is, or isn’t, being hacked? You may not know it, but an employee may be paying their utility bills from your business account.
You must be diligent.
Set aside one day per month—we suggest a Friday afternoon when meetings are typically letting up and the time is a bit quieter around the office—and commit to going through your receipts, invoices and/or paperwork and ensuring they match up against your bank statements. Once again, we’re going to use that word diligent; go line-by-line and ensure every single penny is accounted for and represents a charge you’ve incurred. Hackers have been known to charge a few pennies, here and there, every week, and it can add up.
To put it simply, there are several fundamental reasons why reconciliation is necessary:
- Tracking cash flow: Is the money your depositing and/or withdrawing being accurately reflected by your bank?
- Detect fraud: As we said above, you just never know who can see your account(s). Protect them.
- Detect errors: Perhaps your bank charged you an interest fee that you shouldn’t have been charged. Take the time to ensure you’re not being charged for something that is not “on your tab.”
- Monitor your spending: You may not have realized it, but you’re spending more money on association memberships than you are on wining and dining your clients and prospects. Is that the right spend? Or, do you need to decrease those memberships and reallocate those funds toward taking clients to more games, lunches or dinner? It’s an opportunity to assess and evaluate your overall spending.
Not enough time? Not to worry.
Yes, this is a common thing we hear: “I don’t have two seconds to spare and I need help.” Contact us today; we can help! We can serve as your diligence and take this process off of your to-do list.