“If you’re not currently reconciling your credit card and bank accounts, you may be losing out on a tax deduction or a business expense.”
In this episode of Business Minded Mama Podcast, Stephanie offers insights into one of the most important things in bookkeeping, Reconciliation. Stephanie defines what is reconciliation and shares a step-by-step process to do effective bank reconciliation.
Tune in to learn how to streamline the reconciliation of your accounts and get your business books in order.
TimeStamps:
[1:21] What is Reconciliation
[3:06] How a separate card can make business expenses easier
[4:18] Dangers of not reconciling a bank accounts
[5:27] How to do a bank reconciliation | Step-by-Step process
[7:55] Join the Business Minded Mama Community
Quotes:
“Reconciliation is just similar to balancing your checkbooks.”
“Reconciliation is a way for you to make sure that you’ve captured everything that goes through your business.”
“If you’re not currently reconciling your credit card and bank accounts, you may be losing out on a tax deduction or a business expense.”
Resources Mentioned:
Recommended: ‘Facebook Group’ https://web.facebook.com/groups/businessmindedmama/
Connect with Stephanie :
Facebook: https://web.facebook.com/mrsandsis
Instagram: https://www.instagram.com/stephanieparenza/
Hello, today, I want to talk about one of, uh, what I think to be most, um, one of the most important things to do, uh, each month as a business owner or entrepreneur, when it comes to your bookkeeping, and that would be reconciling your accounts. And I’m going to get to why I think it’s important later, but let’s kind of start off basic.
And for those of you who may not know what that even means, uh, I want to just give a brief description on what reconciling is, and that is it’s the process of ensuring that your records match the bank records and most commonly this is done each month or when the bank or credit card statement processes. So you can definitely have more than one time that it makes sense to reconcile your accounts. For example, most banks will close their statement on the last day of the month, but a lot of credit card companies actually close them sometime in the middle of the month. So you can choose to do the process of reconciling either one time after, you know, everything is closed, or you could do your banks at the first week of the month and do your credit cards towards the middle or end of the month, totally up to you, whatever makes most sense in your process.
And in your day, some of you may remember a time when checkbooks or used often and in your day to day life. And so this is just similar to balancing your checkbook, same thing, but this is for your business. These are for any of your business accounts. And of course today, most of us use a credit card or a debit card to do most of our transactions. So why do I think this is one of the most important things? Well, if you think about it, this is a way for you to make sure that you’ve captured everything that’s gone through your business. If you remember correctly, I had made a suggestion in a previous podcast that you have a separate business bank account. If you want to have a credit card account, make it a separate business credit card account. That way everything that’s flowing through those accounts is business related.
So then when you’re going through the reconciliation process, you are now making sure that you’ve captured everything that’s actually happened in your business. Even if you are using an accounting software and you have the ability to automate your online banking into your software, there are still times when technology will fail you. I think we’ve all had some instance of technology failing as, and I have seen it happen. It will happen to you. At some point, I promise that some transaction or transactions will not pull through. And so when you reconcile your bank account, you will be able to see that that transaction is missing. So if you are not currently reconciling your bank and credit card accounts, you may be losing out on a tax deduction or a business expense. This could be a pig deal for you when it comes to tax time, you could be missing, um, capturing income, which well, I know you have to pay a tax on income and it may be nice not to pay that.
Now it will catch up to you someday. And if you are audited and they see that you did not capture that income, you will pay a penalty for it. So it’s so important that we are capturing all income and all expenses. And the best way to do this is to not only have separate business accounts to reconcile them at least monthly, if that is okay, I’ll, I’ll go back on my, at least monthly, at least quarterly, although I highly recommend monthly because then it’s fresh in your mind and you will know exactly what is taking place. The reconciliation process is really easy. It is definitely more easy if you have a software helping you, but if you don’t, the pieces of information that you need to gather are the beginning balance, which hopefully ties to the ending balance of the previous month. So beginning balance of the month, the ending balance of the month and the end date of that month, or end date of that statement processing.
So that could vary, like I had mentioned with credit card statements, especially. So you need to know those and then what’s missing is the middle, right? The middle of that is all of the transactions, all of the ins and outs that happen during that month. So what you’re doing is taking the beginning and the ending and filling in the middle. So if you start with the beginning and you can’t get to that ending balance that, you know, because you know that because you can see it on the statement, then, you know, you’re missing something in the middle, right? So it’s important to lay all those out. And like I mentioned, if you have an accounting software already set up, this should be a really streamlined process for you because all of the transactions should already be in there. And so you just need to match them.
You will get to the missing information, if anything, much quicker, but if software is not where you’re at right now, and you simply need to do in Excel, a lot of banks and credit cards allow you to just import those details out. And so you’ll just need to come up with a way to organize them and then see if there’s anything missing. Once you have completed that reconciliation process for the month, and you do that each month throughout the year, you can be, uh, calming your spirits, knowing that you’ve captured everything in your business, because your one only using your business bank account or your business credit card accounts for business use only, and you’re not using personal and two because you know that everything balances out it all reconciles. So you must be capturing everything that’s happening in your business, which should give you some peace of mind as you draw closer and closer to tax time and the need to pass along your financials to your tax preparer.
So I hope you found this helpful. If you have any questions, please don’t hesitate to come to our Facebook group, community, the business minded mama, and ask your questions there. I’m here to help you. I want to help you. So, uh, I hope to see you there and I hope you guys have a good rest of your week and I’ll see you all next time.
Be the first to comment