BANK RECONCILIATION
Reconciling your business bank accounts each month allows you to keep your recordkeeping up-to-date. By reconciling each month you are able to...
- Identify lost checks, lost deposits and unauthorized wire transactions.
- Detect and prevent excess/unjustified bank charges and ensure transactions are posted correctly by your bank.
- Detect and prevent embezzlement of funds from within your company.
- Know how your business is doing. You can't really know unless all accounts are reconciled and properly accounted for on your financial statement.
- Manage your cashflow more effectively. Proper management of funds not only saves money but it makes money for you.
- Protect yourself. By timely reconciling and promptly objecting to your bank about any unauthorized, fraudulent or forged checks presented to your bank and paid by that bank, you can relieve your business of responsibility for the shortfall and transfer the risk to the bank.
CREDIT CARD RECONCILIATION
Credit cards have become substitute bank accounts in small business, so reconciling your business credit cards is as important as reconciling your bank accounts.
Reconciling your credit card accounts allows you to:
-
Identify duplicate charges, unauthorized purchases, and incorrect posting amounts.
-
Determine your true liability even though transactions may not have posted yet.
-
Account for online purchases or purchases with missing receipts
-
Manage your credit more effectively and minimize interst charges and late fees.
INCOME STATEMENT
An income statement, also known as a profit and loss statement, adds an itemized list of all your revenues/sales and subtracts an itemized list of all your expenses to come up with a profit or loss for the period.
An income statement allows you to...
- Track revenues and expenses so that you can determine the operating performance of your business.
- Determine what areas of your business are over-budget or under-budget.
- Identify specific items that are causing unexpected expenditures.
- Track dramatic increases in billing adjustments or cost of sales as a percentage of sales.
- Determine your potential income tax liability.
BALANCE SHEET
A balance sheet gives you a snapshot of your business' financial condition at a specific moment in time.
A balance sheet helps you...
- Quickly get a handle on the financial strength and capabilities of your business.
- Identify and analyze trends, particularly in the area of receivables and payables. For example, if your receivables cycle is lengthening, maybe you can collect your receivables more aggressively.
- Determine if your business is in a position to expand.
- Determine if your business can easily handle the normal financial ups and downs of revenues and expenses.
- Determine if you need to take immediate steps to increase cash reserves.
- Determine if your business has been slowing down payables to forestall an inevitable cash shortage.
Balance sheets, along with income statements, are the most basic elements in providing financial reporting to potential lenders such as banks, investors, and vendors who are considering how much credit to grant you.
MAINTAINING A CLEAN GENERAL LEDGER
The general ledger is the core of your company's financial records. These records constitute the central "books" of your accounting system. Since every transaction flows through the general ledger, a problem with your general ledger throws off all your account balances.
By reviewing the details of your general ledger each month, you'll be able to hunt down any discrepancies such as double billings or any unrecorded payments. Fixing discrepancies as soon as possible helps keep your books accurate and allows for the permanent correction of future mistakes.
.
|
