As a small business owner, you know all the ins and outs of your product or service, down to the most technical detail. But how much do you know about your day-to-day accounting? As long as the cash flow is in the black, you probably don’t think about it much - after all, that’s why you hired a bookkeeper. But there is one critical, yet often overlooked task you should ensure your bookkeeper is doing every month: reconciling the business bank statement.
Why Do a Bank Reconciliation?
There are several good reasons to do a bank reconciliation every month, but the most significant reason is to catch errors in your register balance. Small mistakes - month after month - add up to large discrepancies in your checking balance over time and that translates to losing your handle on your true cash flow number. Here are just a few examples of common errors that skew your balance.
- Forgotten purchases - Your bookkeeper can’t subtract funds from your check register if she doesn’t know about them. Owners sometimes forget to turn in receipts for debit card purchases or when a handwritten check is issued. Since the reconciling process compares the check register entries to the actual bank transactions, it often reveals these forgotten purchases.
- Duplicated or misread receipts - When you pay a subcontractor or vendor with a debit card, you will usually get an invoice, as well as a receipt when they run your card. Your bookkeeper may not realize they are for the same transaction and enter them both. It’s also common to pick up the wrong amount from a receipt, such as the subtotal before tax or other charges are added.
- Numerical typos - Bookkeepers are usually lightning fast at data entry and may not catch transposed numbers and other typing errors until they reconcile the bank statement.
Ask Your Bookkeeper
Now that you understand the primary reason for doing a bank reconciliation, the question is – how do you know your bookkeeper is doing it monthly? There’s only one way to find out: ask. It may feel like micromanaging, especially if accounting isn’t your strong suit, but to make informed daily business decisions, you need accurate numbers and reconciled bank statements are fundamental. If your bookkeeper doesn’t grasp their importance, you may want to ask him or her these additional questions to test how competently your bookkeeper is filling their important financial role in your company.
Still Need a hand?
Wondering if your bookkeeper or finance team is up to par? Many savvy business owners use outsourced accounting services for a more productive and goal-oriented finance function. Talk to us about how this option can help your business.