How often do you check your credit card statement before paying it? Who even takes the time to balance a checkbook anymore? Most of us treat reconciling our personal payments like flossing: we know we should do it, but it’s a hassle and we’ll probably be fine anyway. Personal finances are now highly automated, leaving you off the hook for making any errors that could pop up. Transparency between you and your bank has made life easier.
Unfortunately you can’t treat your business’s finances like flossing - it’s more like breathing! Here are some reasons why you should reconcile your books with your bank statement at least once a month.
1. Checks are Slow
You can take a more hands-off approach to your personal finances nowadays because transactions are almost instantaneous. One click and about 2 seconds is all you need to pay someone through Venmo. Three clicks and you can check your up-to-date checking account balance.
Your business’s finances are anything but instant. Banks take time to process payments and customers take as long as possible to hand over cash. It’s delays like these that create discrepancies between your general ledger and your bank account. These differences can easily snowball and have disastrous consequences if not reconciled. The more often you ensure everything matches, the more confident you can be that you have as much money as you think you do.
2. Typos Happen
It shouldn't surprise you to learn that backspace is the third most commonly used key on the keyboard. And while the data is scarce, one source cites the average typist make 8 mistakes for every 100 words typed. With all this fat fingering, it’s only a matter of time before an extra 0 either gets added or left off of your books. Making sure your numbers match your banks’, so you can catch any problems before suffering serious consequences.
3. Things Fall through the Cracks
In startups especially, there are so many things happening simultaneously and to-do lists that seem to only get larger. Therefore, it’s not uncommon for things to fall through the cracks by you and by your clients client as well. For example, we recently had a client drastically overpay for our services. Reconciling our books allowed us to catch the mistake and foster some good will in the process.
There are numerous reasons that can lead to a mismatch between your numbers and your bank’s, but at the end of the day, you need them to match so you can budget early and budget often. Predicting the future, or making budget forecasts, is hard enough as it is - you are jumping blindly to a certain degree! But if you are diligent about reconciling your books, you can rest assured that you left the ground on solid footing.
