It’s tax time. Do you have your paperwork together and are all your statements reconciled? Before you start pulling your bank statements and backup support paperwork together for your accountant for last year’s tax return, you should go through and reconcile your credit card statements for your small business.
Why? You may ask. We all know that reconciling a bank account makes it easier to confirm the funds are correct. It will limit the error of bounced checks and improper managing of accounts payable. But, if you use a credit card for your business supply purchases, keeping your money management software or online account accurate will clear any issues that may arise when you revisit these transactions at the end of the year.
But if you are not convinced yet, read this post that explains the three benefits of reconciling not only your bank accounts but also your credit card accounts.
3 Crucial Benefits to Reconcile
Your Business Bank Accounts
- It will maximize your tax deductions. You will make sure you have every transaction accounted for on your tax return. If your transactions are miscategorized or not included at all in your P&L report, it can easily be overlooked. Don’t expect your accountant to review all the transactions line by line. They have other things they need to deal with in your tax return than reviewing transaction details. This task is something you or your bookkeeper (like me) can do for you.
- It helps prevent fraud internally and externally. If someone is using your card for personal use, you will only know that if you cross-reference the receipts with the credit card statements. With all the credit card numbers stolen these days, it helps you make sure all the transactions are legitimate, and you have made them for your business. I had a client allow an assistant to use her credit card. After the client abruptly left, she noticed there were charges on her credit card. It turns out the assistant had charged $150.00 on her card. She didn’t reconcile the account right away, so she didn’t know until the assistant had left her business. Don’t allow yourself to be financially vulnerable. Trusting people is great but not taking responsibility for your finances can result in a problem down the road.
- It helps you find mistakes and errors. The data entry or downloaded data could be incorrect. I have had the credit card and bank companies download duplicate information resulting in duplicate charges and deposits which took a lot of time to clear up. Taking the time once a month to visit all the statements (credit card and bank) will help you work with just a snippet of transactions at a time. And, since there will not be a lot of transactions each month, on the credit card statement, you can easily flag the ones that are incorrect. Dealing with this when you are audited may be even more stressful and can result in major headaches.
I hope this motivates you to take the time and reconcile your bank and credit card accounts each month. If you use the credit card a lot or a little, it is best to have all the transactions matched with the banks’ information.
Starting Today AND Do THIS Task!
For this year, add a recurrence appointment to your calendar to remind yourself that you need to reconcile your credit card and bank statements each month. Use the date that those particular statements come in. For example, if you get the credit card statement on the 5th of the month, add a recurring appointment to the 5th of every month as a reminder.
By making an appointment for each month to take care of these tasks, you will remind yourself that it needs completing and hopefully deter yourself from forgetting about it or not making it a priority.
If you are looking for a bookkeeper to help you stay on track with your reconciling accounts, feel free to contact us.
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