Reconciling accounts is the process of verifying that your financial records are accurate and that your books are consistent with what your bank statement shows. You should reconcile your accounts every month to stay on top of cash flow and to avoid any nasty surprises from your bank. The following tips might make the process easier:
• Log all expenditures, withdrawals and purchases into your books immediately.
• Be sure to include regularly scheduled bill payments, electronic payments and automatic debits.
• Enter every deposit promptly, whether made at the bank, at an automated teller machine, or by direct deposit.
• Limit access to company checks and business credit and debit cards.
• Establish clear policies for employees who expend or handle money for the company.
• Do a spot reconciliation daily or several times a week.
• Check your bank statement carefully and follow up on any unexplained items.
The most common outstanding items will likely be checks that have not yet cleared and deposits that have not yet been credited to your account. Other discrepancies may result from miscellaneous charges or credits, such as fees, penalties and interest earned.
If your bank charges a monthly account fee or requires you to maintain a large balance, check around for another bank that offers a free or even interest-bearing checking account. Look for a bank that offers special programs for small and medium-sized enterprises and provides services targeted to the specific needs of small businesses.