Paying attention to finances is an excellent habit to develop. Unfortunately, many of us, in personal and business finances, choose to leave the good habit to someone else. This can cause problems that could be avoided, all with a little more care and attention to detail. Bank reconciliation is an important tool for keeping better track of the ins and outs of your accounts. Being aware is the first step towards better financial health.
Let’s take a look at a few ways to check up on in your finances and keep your business running smoothly.
For any business, it is imperative that you have a separate business account. Using a personal bank account for business transactions is messy and unclear for accounting practices. Connect your business bank account to your accounting software so that the two can match data. It is important to check the accounts (bank and software) against each other on a regular basis. For some businesses, this may mean daily, weekly, or monthly. It depends on the number of transactions going in and out of the account as to how often to analyse the account.
In checking your account regularly, you will reduce the risk of fraud, verify customer payments, and make sure that important bills are paid. Bank reconciliation is basically just like balancing a chequebook, it involves authenticating the transactions shown on the bank register to your accounting software. Reconciliation can also help to avoid overdraft fees or bank fees if a customer’s payment does not clear, and other needless problems that can be avoided with regular procedures in place.
Are you invoicing properly and receiving payments on time? For businesses with a high volume of invoicing, make sure you have a system in place for collecting payments rapidly and efficiently. Once the invoice is sent, then a follow-up message should be sent if payment is not received promptly after a certain set period.
It may seem simple, but invoicing correctly and quickly can make a big difference to your business. Providing a service or selling a product deserves a prompt payment. Persistence is key with invoicing. Have a specific system in place in your terms and conditions for late payments that are clearly shown on every invoice that is sent out. Make sure your invoice looks professional and easy to read.
Almost everyone has automatic debits from their bank accounts, for various subscriptions to suppliers. In business, this automation is very convenient and efficient. However, every 6 months, take the time to reevaluate the need for each subscription. Some are vital to running your business, such as an accounting software subscription or certain bank account fee that cannot be avoided. Others, like social media accounts or website subscriptions, can be altered to a lower rate or switched to a free service.
If a subscription was tried but is no longer used, then it is time to opt out and save money. It may seem like a small saving, but over time even the smallest amount makes a difference. Sometimes it is better to streamline your subscriptions because chances are you may have tried one thing and then found it was not that helpful to your business and moved on.
Use the Best Tools for the Job
Bank reconciliation is a very important tool to keep your business on a solid foundation of maintaining net profit. “The devil is in the details,” so make sure your accountant works with you to go over statements and reports regularly to catch any mistakes. Best to be over prepared than caught out with an accounting error. Accounting software and online banking are imperative to your business success. Utilise the tools at your disposal to keep your business financially fit.