Archive for January, 2012

9 Steps to Manually Reconcile a Bank Statement

January 27th, 2012

A business must track its funds to have a clear picture of its financial health. Bank statement reconciliations are an tool that business owner’s use in a proper cash management process. This procedure compares the account balance, as reported by the bank, against the account register in the company’s general ledger. This process ensures all cash items clear the company’s bank account in a timely manner. It also prevents the company’s general ledger from becoming clogged with inaccurate or irrelevant information. Cash accounts with significant inaccuracies can mislead business owners into believing the company has better cash flow than it really does.

The process of preparing a bank reconciliation involves making adjustments to the balances in both the bank statement and the company’s records to confirm that the ending balances match and that every item is properly accounted for. It is important to prepare bank reconciliations in a timely and regular basis (monthly, for example), so if questions regarding bank fees or errors arise both the company and the bank can be made aware as soon as possible.

Because of the lag time between deposits made and checks written, and their actual posting to your account, it is rare for the ending balances to match. Reconciliation ensures all transactions are accounted for, and provides a true cash balance.

To preform a proper bank statement reconciliation, follow these nine steps:

1. Comparison

Start the bank reconciliation process with a comparison of the company’s bank statement and general ledger cash account. Check off all items that match. This part of the reconciliation ensures all items recorded in the general ledger have cleared the company’s bank account. Once an item clears the bank account, it usually represents the finality of that particular business transaction.

2. Add Deposits

Once the comparison process is complete, note all items that remain on the company’s general ledger. Add any deposits in transit to the ending balance. Deposits in transit are deposits that you have recorded in your register but have not appeared on the bank statement.

3. Outstanding Checks

Deduct outstanding checks from the ending balance. These checks have been deducted from your check register, but have not yet cleared the bank.

4. Bank Errors

Add or deduct any bank errors to the ending balance. Examples would be incorrect deposit amounts and incorrect debits.

5. Check Register Reconciliation

Deduct bank service charges. Service charges could be account maintenance fees, check overage fees if you wrote more checks than you are allotted for the month, wire transfer charges, returned check fees, etc.

6. Interest Earned

Add interest earned if you have an interest bearing account.

7. Check Register Errors

Add or deduct errors in the check register. These errors could include posting a payment that was not actually a cash transaction, or omitting a payment.

8. Journal Entries

You may need to prepare journal entries as part of this reconciliation process. These journal entries will correct any errors found during the bank statement and general ledger comparison. Owners can also use journal entries to post any bank statement items into the general ledger if necessary. Once all journal entries are posted, you may re-run the general ledger cash account to update the ending balance for all new posted items.

9. Compare Both Statements

Compare the adjusted bank statement balance per your reconciliation to the adjusted cash balance per the general ledger. The balances should be equal. If the two balances do not match review the steps; verify that the bank balance has been adjusted for all deposits in transit and outstanding checks, and that all activity has been properly posted in the company’s general ledger.

Cool Product: Carbonite Business

January 19th, 2012

If you want the ultimate in off-site data protection, look to cloud computing solutions such as Carbonite Business to help you survive and recover from disasters that wipe out your physical systems.

Unlike traditional daily or weekly backups, Carbonite Business continually backs up the files on your PCs to its secure data centers throughout the day. There’s no intervention required by your employees, and you have complete visibility into, and control over, individual backups via the handy My Company Dashboard, where you can see your users, computers, storage in use, backup status and more.

Best of all, the pricing scheme for Carbonite Business can’t be beat. Instead of paying per PC, you pick the plan that fits your storage needs, 250GB for $229 per year or 500GB for $599 (which includes service for one Windows server), and protects as many machines as you need, resulting in one of the lowest per-gigabyte storage prices of any online business backup solution. The home and home office version starts at $59 per year per computer.

Never interrupts your business
With Carbonite, your backup happens automatically, in the background. Users never have to stop working, and after the initial backup, shouldn’t notice any impact on performance. And no one has to choose between backing up and doing their jobs.

No hardware required
Carbonite is 100% software-based backup – there’s no hardware to install or maintain, no wires to connect, no disks or tapes to deal with, no technician needed. You simply install the software and Carbonite takes care of the rest.

Safer than local backups
Your backup is encrypted at all times, and stored on redundant disk arrays that are immeasurably more reliable than internal or external hard drives. (If you have external hard drives you can back them up with Carbonite Business, too.) Our state-of-the-art, guarded data centers protect your business backup from theft, fire, water damage and anything else that can happen at your office.

Smarter than scheduled backups
Carbonite backs up your data continually, updating your backup in the background – eliminating the potentially costly ‘backup gaps’ created by daily or weekly backups.

Restores files fast to minimize downtime
If you lose a file, get it back with a few clicks. If your hard drive crashes, restore all your backed up files to another computer via Carbonite.com – or, for mission-critical recovery, have your backed up files shipped to you on a portable hard drive.

Anytime, anywhere access to backed up files
With Anytime, Anywhere Access, you can open, view and share any file in your backup from any computer connected to the Internet. Or use one of our free mobile apps to access your files from your iPhone®, iPad®, Android™ or BlackBerry® device.

The Importance of Monthly Bank Statement Reconciliation

January 12th, 2012

The proper reconciliation of bank statements is vital for any small business. Even if you don’t have an accountant on staff, this procedure must be done monthly. Whether you use software such as QuickBooks, or you simply keep track of your bank records, you need to double-check that everything adds up.

Catching Errors

Even if you implement strict control measures, the potential exists for human error in . If companies fail to reconcile their bank statements every month, these errors may go undetected and they could be costly. For example, if a teller at the bank calculates a deposit incorrectly, the company may end up short of the funds it needs to continue doing business. Or if checks you have sent out are lost, or simply not yet deposited by the payee, you might see your bank balance and think there is more money in your account available for you to spend then would be wise. And if those lost checks are found and deposited, and those checks that someone has been holding onto for a few weeks are cashed when you do spend that “extra” money, you’ll soon be bouncing checks all over town. The reconciliation process helps provide a method of double-checking to avoid mistakes.

Following Up on Transactions

If a vendor complains about not receiving funds, it could be possible that a check was lost in the mail. When you are reconciling your bank statement every month, you can catch checks that have not cleared, and this will help you track down any potential missing payments. In addition, you can use your reconciliation statement to make sure your other company transactions are going through and have been calculated for the proper amount.

Keeping a Close Eye on Company Performance

When small business owners do not take the time to reconcile their bank statements personally, or at least see an overview of the results, they may be unaware of potential income issues or shortfalls. While delegating can help you manage your company better, you need to be able to see exactly what is going on within your company. Keeping an eye on bank statements can help you keep your finger on the pulse of your company and spot income fluctuations.

Loss Prevention

When bank statements are not monitored and reconciled, the potential for undetected loss is high. Not all employees or firms are honest, and you may not miss money that has been taken for some time. This is how some employees are able to embezzle thousands if not millions of dollars over time. Reconciling your bank statement helps you prevent losses and may indicate a potential problem in your system.