What Is Accounts Reconciliations? How To Keep Control Of Your Books
Account reconciliation is making sure that your liquid assets match your checkbook balance. Basically, it is making sure that all of your money is accounted for, whether it is through expenditures, interest rates accruing, or money just sitting there. You need to do account reconciliation for yourself and for your business and it is simpler than you might think. Here are some tips on how to get started.
Keep Your Receipts
The first thing you need to know when it comes to keeping up on the books is that you should keep your receipts. Your business needs to keep all receipts and even request receipts when they are not automatically offered. This may apply when you do business with a company owned by a friend or you do a lot of business with the same company.
It may seem annoying to always hold on to receipts. You try to go paperless, especially with this kick about going green. As great as saving the trees and earth is, you need to make sure that you can account for your expenditures in a concrete way. When you do not have something to prove an expense, you can miss something very important like fraud or overcharging. Banks sometimes mess up the balance in accounts on accident. Everything is electronic so it is bound to happen at some point. When something like this happens, often the only way to prove the correct balance is with receipts.
You might notice that the IRS tells you to keep personal receipts for up to 7 to 10 years after filing taxes. This is because of auditing. If you get audited you need to prove that the taxes you were filing were correct. Leaving a paper trail is crucial to your business as well. It may be the only way to check the books and prevent someone stealing from the company. Many businesses have come to ruin because they did not have a system of checks and balances and keep such paperwork. Don't let this be your demise-keep your receipts and have all employees turn in theirs, too.
Call With Questions
If you find a discrepancy in the books, look into it. If your account balance does not match your receipts and supposed expenditures, call your bank. Sometimes, problems do happen, and the only way to fix them is to face them. It is up to you to make sure that everything is kosher with your account. The bank insures your money, but it is your responsibility to look after how you use it and where it goes. Someone may be embezzling or not reporting expenses by accident. Use a good accounting team to keep tabs on it all, and check it yourself, from time to time. Sticking your nose in the financial affairs of the company never hurts. It is a good way to make sure that the accountants are good at their job and trustworthy.
Check Up Frequently
You need to reconcile your account frequently to avoid mistakes. When you don't, you can end up in a sticky situation. For example, what happens if someone forgot to turn in a receipt for a client lunch three months ago and it has resulted in a discrepancy in your books? That employee may very well have forgotten that particular lunch and what they did with the receipt. It can make them look bad and put them, you, and everyone else under undue stress.
So follow these steps to keep up on account reconciliation for your company. Do it frequently, keep your paper trail, and don't be afraid to call your bank with questions. These tips will get you on your way to financial success.