Keeping your bank reconciliation of your online business up to date is essential. This enables you to produce your own accurate financial reports regularly. This is important when analyzing your business so you can make good well judged decisions.
So, what are bank reconciliations?
When you start trading as a business your accounts will be exactly the same as the banks, zero. However, when you start trading there will be differences and this is because timing and items not known. All a bank reconciliation does is helps you identify those differences so you will be able to update your records.
What are the possible differences?
o Un-presented Checks – When you write out a check, it takes a number of days to go through the banking system before it clears, so this is a timing difference. If this was the only item, your books would show a lower balance compared to the bank.
o Outstanding lodgements – This again is a timing difference where your cashbook would show receipts banked but as of that date it hasn’t shown up on the bank statement.
o Receipts on statement – This is where you have been paid and it has gone straight into your bank account. In your books you may not know the exact figure that you are going to be paid. You may not for example be from the US but the merchant company you are using is. So, you then have the currency complication with the exchange rate.
o Payments on statement – On your statement you are quite likely to have some sort of charges. Mostly it is bank charges but also the possibility of your credit card especially if you use it in another currency.
When doing your bank reconciliation, the whole purpose is to balance your cashbook with the statement thus identifying the differences. If I could give you one tip it would be; don’t try to do too much in one go. In an attempt to do it quickly, you will make mistakes. This won’t be a problem if you do it regularly.
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Check it out: Bank Reconciliation – Understanding Why it is Important For Your Online Business
Yes. It is a must to have a monthly bank reconciliation. You can read an article posted at http://bit.ly/bankreconciliation. The Superb Importance Of Bank Reconciliation From Small To Large Scale Entrepreneurs
Posted by: Cocoyrambuyon | 11/02/2010 at 02:58 ก่อนเที่ยง