Reconciling your bank accounts means matching up your accounting software to your bank statements.
When you only work with an annual tax accountant, this doesn't happen very often. This is common with small businesses when they first start out. In fact, it's on our list of the top three small business accounting mistakes. However, as your business grows and has more activity to track, this isn't ideal anymore.
So, why should you care about how often your books get closed? Failing to do this in a timely manner means you're almost guaranteed accounting errors, missing money, and have no idea how your business is really performing.
At CSI Accounting & Payroll, we've perfected monthly accounting over the past 50+ years. We've seen firsthand how something so simple can provide great benefits. Here are the three reasons to perform monthly account reconciliation.
Three Reasons to Perform Monthly Account Reconciliation
1. Catch and Correct Accounting Errors
No matter how good your accounting system is, there’s still the potential for human error. Letting these mistakes go undetected can be extremely costly to your business. Accounting numbers build on each other over time - so if one month isn't accurately closed out, the next month definitely won't be correct.
By reconciling your accounts every month, you can spot these errors before they damage your bottom line, and it helps you prevent mistakes in the future.
2. Follow Up on Your Transactions
It doesn’t happen very often, but sometimes checks can be lost. If your clients say they haven’t received one, what do you do about it? Are you able to see if it's true or if there was just confusion?
If you’re reconciling your bank statements every month, you’ll be able to see the checks that haven’t cleared. That way, you can find these missing payments and correct them, leaving you looking more on top of things and maintaining clients for longer.
3. Track and Compare Your Business Performance
Speaking of checks not clearing, if you don’t reconcile your bank statements monthly, you might not be aware of potential financial problems, such as insufficient income or poor cash flow (one of the five financial reasons businesses fail).
Monthly account reconciliation shows you exactly where you stand. Plus, it lets you track your performance over time, meaning you can compare the current month's numbers to the previous month or year-over-year.
Close Your Books on Time, Every Time
Even if you don't have an accountant on your staff, you should still be closing the books every month. With monthly insight into your cash flow, you’ll be better able to track your progress and avoid costly errors.
If you don’t have enough time or capacity to do this in-house, a professional monthly accounting service can provide you with the accurate financial tracking you need. Have you looked into monthly accounting as an option yet? If so, why not consider CSI Accounting & Payroll?
We've helped thousands of small business owners achieve everything mentioned in this article, plus more of the benefits associated with monthly accounting! For a free consultation, click the button below to see if we can be a good fit for your business:
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