Bank Reconciliation

Keep your accounting cost down at year-end by doing this one thing - reconcile your bank.  

What is that?

It's when you check that your accounting software bank balance matches your bank statement balance at a particular point in time - usually done each day, week, or month depending on the volume of transactions.

It's when you tick off all transactions in your bank statement and there's no transaction in your accounting software for that period that is unmatched or missing in your bank ledger in the software.

When you perfect the art of doing the above you can be rest assured that you've accounted for all incoming and outgoing cash going through your bank account.

Of course if you are one of those that has a bad habit of using your personal bank account or credit card for your business income or purchases, then this process of bank reconciliation is not going to be very useful at all and things will be very messy, and your business profitability will be difficult to assess.

So do yourself a favour, please keep your business income and expenses strictly separate from your personal.

Bear in mind that for every transaction there are 2 entries in the accounting ledgers. so when you spend and receive money, one side of the accounts is taken care of in the bank ledger but where the other side of a transaction goes is the other important bit.  Usually, one on the balance sheet side and the other on the Profit and Loss side, but this is not always the case. Eg. in the case of an Asset purchase or a Loan transaction, or a payment of a payable collected over time (eg. Super, PAYG, GST).