You can always hear your bookkeeper whispering in you ear to send the bank statements on time. Why are they so obsessed? They are taking care of you and your business!
Why all the fuss about the reconciliation? Why is so important reconcile your accounts on time?
- Don’t forget to report all your income: reporting ALL your income is the best way to avoid audit and build a business that fulfill its responsibilities. It’s is your duty as a taxpayer to report all sources of income, and when you keep track of your income periodically you can make sure you are avoiding non-reporting penalties. On the other hand, measuring your income against your goals give you the answer if you are on the right track to reach your financial goals.
- Identify your personal contributions: when reconciling you need to distinguish your personal contributions from the business income. Remember to keep track of them and document the transactions to support your claims.
- Don’t forget to claim all your expenses: as important as reporting all your income is also identifying and reporting ALL your business expenses. When you claim all your eligible expenses you are reducing your taxable income and then saving on taxes. Review on detail you bank accounts, credit card statements and any cash receipts you have and send the to your bookkeeper on time. The expenses, of course, need to be all business related and supported by the proper source documents. https://www.dcastro.ca/blog/record-keeping-requirements-from-cra-perspective
- Keep track of receivables: comparing your sales and deposits at the bank helps you plan your cash flow, but also give you a rough idea of how much money are you owed. The best way is creating detailed reports and collect your funds periodically, but a quick look at your bank account and your invoices lets you know who well (or not) you are doing strategically.
- Avoid errors: not frequently, but the bank can make mistakes too. Duplicated transactions not cashed cheques, incorrect charges to your account. When you get into the habit of reviewing periodically your credit card and bank accounts charges you can detect these mistakes or fraudulent charges on time and deal with the bank accordingly.
- Be sure you have enough money: chequing your bank balances and debts give you the chance of savvy planning for the future. it's really important to know how much money do you have today and how much of that is owed to third parties. You can separate funds to pay HST, income taxes and save money for yourself and your business.
Reconciling your bank accounts gives you an amazing planning tool that can be using to improve the financial situation of your business. Making sure you report all your income and claim all your expenses can save you money, time and stress when the tax season arrives. You will be ready!
Do you reconcile your bank accounts periodically? Are you using it as a planning tool?
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