I recently was working with a client who was not regularly reconciling their bank accounts. It was very apparent, even though they are a small not-for-profit with minimal transactions, just how important it is to complete monthly bank recons. If you don’t do these yourself, or you simply don’t do them in a timely manner, read on! You just may realize what a priority it should be for your business.
The blindingly obvious reason that my client needed to be doing their monthly bank recons was to identify a recurring posting error: duplicate deposits. A common error was occurring where customer payments were being posted through the “Receive Payment” module and through the “Record Deposits” module. I discuss this situation in a previous blog: QuickBooks & Common Deposit Mistakes. The takeaway from this is that a bank recon would have shown left-over deposits in QuickBooks that don’t match up with the bank. A little research would show the duplication and corrections could be made.
The same can be true for duplicated expenses, which I discuss in more detail in a previous blog: QuickBooks & Common Expense Mistakes.
Reason for timeliness: You may over-assume how much cash you have on hand if you’re only looking at your accounting records and not comparing with the bank. This could lead to cash-flow problems but can be mitigated if corrections for posting errors are done as soon as possible.
Bank recons will identify transactions that did not get posted. This could arise from simple oversights or could be an indication that communication from a third party was not received. No matter the reason, it’s critical to become aware of items still needing to be posted.
Reason for timeliness: Again, you may over-assume how much cash you have on hand by not comparing bank transactions to ones posted. A large transaction clearing the bank for more than you actually have will not only create a cash flow problem but will likely result in overdraft fees or rejection by the bank. Catching these transactions early reduces the risk of spending more than you have.
This ties in with missed transactions. If you are not reconciling your bank account, how would you ever know if an employee was embezzling funds? This type of fraud often involves masking the situation, but if an employee knows that the bank recon is not done, the embezzlement becomes that much easier. It may be difficult, if not impossible, to connect unposted transactions with fraud months or years after it occurs.
Another common occurrence of fraud is unauthorized charges. Most banks will have a specific time frame in which you can get reimbursed for these charges and if you miss that window, you’re simply out of luck!
Reason for timeliness: Even if you only commit to reviewing your bank statement, time is of the essence! The more recent the date, the easier it will be to distinguish legitimate charges from potentially fraudulent ones. Memory will play a big part in why timeliness is so important. As always, go a step further than simple review and do a bank recon.
If you’ve never reconciled your bank accounts and are overwhelmed at the idea of doing so, please reach out to me to discuss getting your recons caught-up. Bank recons are my absolute favorite (yes, I’m not kidding!) and I can get through them quickly and accurately. Once they are caught-up, I can train you on the process and I guarantee it won’t feel so daunting going forward. All you need is a clean start and the confidence from having learning a tried-and-true process.
You may have caught on by now that the main purpose of my blog is to provide my readers with little tidbits on accounting, QuickBooks, and Excel. I’d also like to use my blog so that readers can get to know me better, whether it be current clients, prospective clients, colleagues, or anyone else! I want you to know the person behind the blog because, although numbers are my livelihood and career passion, they are not the only thing that makes me the enthusiastic accountant that I am. Read on to learn how I fill my time outside of work hours.
I have always had a love of learning! “Teacher’s pet” was not a foreign name to me growing up and that love of learning has never subsided. I am currently enrolled in my MBA at the University of Nevada, Reno. My favorite TV channel currently is the Weather Channel, with shows like “Weather Gone Viral” and “Strangest Weather on Earth.” I also enjoy watching documentaries and love getting caught up in a good book based on historical events. One of my favorite recently read books is The Worst Hard Time by Timothy Egan, which depicts the mid-West during the great dust bowl of the 1930’s. Did you know that’s where the term “dirty 30’s” comes from? Neither had I!
The learning item rolled into reading, but reading definitely deserves its own category here. There’s really nothing better than laying out in the sunshine with a charming storyline and getting lost in fact or fiction. Growing up, my mom and I would read all day long during the summer and we called it our “Reading PowWow.” Cheesy, right? 😉
I often start and never finish many different crafts, but sometimes I make something pretty neat! One hobby I have is scrapbooking. It’s one of my few creative outlets and I sure wish I spent more time doing it….maybe once my MBA is done I can get back to it. Then there’s coloring – who hasn’t gotten into that craze?! Ahhhh, so relaxing!
Home Improvement Projects
My first home was a condo in the Sacramento area, and it was in great condition but stuck in the 80’s. I’m very fortunate to have a General Contractor dad, as he not only helps me with every project, but teaches me the basics with each time. Now that I own a beautiful home in Reno, my previously learned skills are being put to the test. Where my memory fails me, my wonderful boyfriend steps in, and my dad is just a call away if we get in over our heads. Our current project is simple but daunting… painting the entire bottom floor of our house. The previous owner painted not only the walls, but the ceiling also, a golden yellow – YELLOW!! That’s just too much. Time to upgrade to a pretty flannel grey 😊
Yes, let’s get the cliché out of the way – I love hiking! There are tons of trails in the Reno/Tahoe area that I need to explore and there are so many breath-taking views to be seen. Last year we bought a kayak and paddleboard which we took out regularly to Boca Reservoir and the lake in Truckee. I figured I would be horrible at paddle boarding since I’m not very sports-savvy, but to my surprise, I never once feel off the entire summer! I can’t wait to go this year. I also did Tough Mudder in 2012, when I was heavy into doing CrossFit. I skipped a few obstacles and suffered through the crazy Truckee altitude, and it was torturous but exhilarating. I hope to do it again someday!
I have a bit of on obsession with shopping, but I’ve learned to reign that in lately (my wallet is relieved!). I also have a reputation for my savings techniques – you know, the coupons, the sales, the whole she-bang! I love getting a good deal and stockpiling when I can. Target is for sure my go-to for anything non-perishable and I combine coupons, sales, my RedCard discount, and cartwheel savings to score some stellar deals.
The only children I have so far are my four-legged ones. I have adopte
d 3 myself – one female cat Jill (she’s very sweet), one male cat Jonas (he’s an A-hole), and one senior male mastiff-mix Rocky (the biggest, sweetest lovebug). My boyfriend adds his senior female golden retriever (also a big love, but also the size of a small horse!). I cannot image our household without all our animals, as they bring us so much of both stress and joy.
Well, I know I’ve probably left out some other leisures of mine but this at least gives you a little insight as to what I like aside from accounting. I would love to hear about your favorite past-times so comment with them below – maybe we have some in common!
As a small business owner, you may or may not have designated bank accounts and credit cards for your business. In either instance, it’s important to distinguish between business and personal transactions and there’s a few ways this can be done.
Business Accounts – NO
If you’re like me, you only have personal accounts. This is common is you’re a sole proprietor or independent contractor. There is no legal separation between you and your business so using your personal accounts is the simple route. But how good are you at keeping tabs on what is what?
I not only use QuickBooks Online for my clients, but for myself as well. The difference for me is that I track ALL my finances. Yep, the process that most businesses do for their monthly accounting is something I do for me personal finances as well. I utilize class-tracking to assign a different class for anything that is tied to my business. This makes the separating between work and play seamless and easy to identify for tax time.
Business Accounts – YES
If you’re like many of my small business clients, on the other hand, you DO have separate business accounts. Which is stellar! Until…..you use your business account for personal or vice versa. I simple solution would be to mirror what I described earlier, with the class-tracking. This will only work, however, if you do your accounting to include all your personal finances.
If you wouldn’t dream of maintaining such close tabs on your personal monies then you will have to be diligent about keeping your receipts! If your accountant is merely basing their work on your business accounts, and you do a business transaction with a personal account, you may miss out on writing of those expenses. Here is how to account for the cross-over:
- Business purchase on personal account: this is essentially the same as putting your own money into the business and would be recorded as an Owner/Partner Contribution
- Personal purchase on business account: this is essentially the same as paying yourself first, then making the purchase and would be recorded as an Owner/Partner Distribution
If you are a sole proprietor, the Contribution & Distribution accounts will just be used as an offset. If you are not a sole proprietor and must report taxes on actual funds taken out of the business, your net Contributions and Distributions will be reportable income. It is wise to pay the company back if you use a business account regularly to pay personal items, otherwise it could hurt at tax time.
Head this advice: maintaining on-going separation now will save you an immense headache later!
Utilizing the bank feeds in QuickBooks makes for a more seamless bank reconciliation process and allows you to keep up on your banking transactions more timely. Once you have your bank feed set up (which is a fairly straight-forward process that uses your online banking login information), you can begin matching transactions posted with those that download from your bank feed.
These steps and figures will all be using QuickBooks online. If you need help with using the desktop version of QuickBooks, please feel free to CONTACT ME.
Figure 1: First, from the left-hand menu, click on “Transactions” and then on “Banking.” You will see any linked accounts at the top. Clicking on each account will display a list below of unmatched transactions. It’s always good update the bank feed often by clicking on “Update” in the top right.
Figure 2: Once your bank feed is updated you can start matching transactions. When QuickBooks finds assumed matched transactions – ones with the same amount, payee, and date range – it will indicate “Match” in the Category/Match column. If you confirm they are a true match, click “Match” under the Action column to the far right. Doing so will remove that transaction from the list.
Figure 3: If you match a transaction by mistake, which can be an easy thing to do if you have multiple transactions to the same payee for the same amount, you can simply unmatch it. Notice how directly under the accounts there is: For Review, In QuickBooks, and Excluded. Click on “In QuickBooks.” This will display all the transactions you have matched. Simply find the transaction in question and click “Undo” under the Action column to the far right. This will unmatch the transactions and place it back under the “For Review” section, where you can match with the correct transaction.
Figure 4: As I mentioned, using bank feeds will streamline the reconciliation process. To see this in action, click on “Go to Register” on the far-right side. This brings you to the register of all posted transactions to this account. Notice the two green squares in the column second from the right. This is indicating that the transaction has been matched to a bank feed item. Once reconciled, that “C” above the squares will change to an “R.” Essentially, when you start a bank reconciliation, it will already take into account the matched items so you do not need to mark those manually.
Those are the basics for using bank feeds. There are some other functions that relate to bank feeds but the items above should be enough to get started. I invite you to give it a shot, it’s a great time saver! It’s also a great stress-reducer if waiting to do bank recs with a monthly statement is a hairy task due to a high volume of transactions.
As a new business owner, I love hearing stories from other successful entrepreneurs. It fills me with inspiration and energy. Although I’m only 6 months in, I hope that my story will inspire at least one person to take that leap of faith to work for themselves. My story started first with an attempt – and a failure – which you can read about in My Gritty Start-Up.
I grew up in the small foothill town of Placerville, CA. I couldn’t wait to move away after graduating high school, so I ventured off and lived in the greater Sacramento area for over a decade. I graduated from CSU Sacramento in 2009 with my Bachelor’s in Accountancy and passed the CPA exam in 2015. It was in 2014 that I started and failed at entrepreneurship. By the time 2015 came around, I found myself stuck in a rut and spiraling into a depression. I figured I should be a married, self-employed mom by then, but nothing seemed to be going as I had planned. I was a 29-year-old, single, employed individual.
It was then that I decided I needed a change, I needed to stir things up and get a change of scenery. So, I made the bold move to Reno, uprooting my entire life to make the 2-hour trek. I packed up my things, my big goofy mastiff-mix, and my two cats, sold my condo, and never looked back. I bought a house here just last August, so I’m definitely here to stay!
For the first 4 months in Reno, I completed my then-current accounting job remotely. The arrangement was ideal as it allowed me time to search for a new job and allowed my employer time to find and train a replacement. We both happened to find what we were looking for within a couple weeks of each other, so I had no gap in employment.
My first Nevada job sounded like a dream – a Supervisor for an accounting department at a large gaming company. I was ecstatic to land my first supervisory role since I felt I had been working towards that next level for quite some time. Only problem was, my team was made up of 8 direct reports (which is a lot!) and I was overseeing a department that was new to me so there was a huge learning curve. I quickly realized the job was more hands-off with regards to the accounting and entailed mostly checking others’ work and approving time off requests. This was not what I had hoped for and I soon felt overwhelmed with feeling like I had made a mistake taking this job. I resigned.
I was unemployed for a month, right around the holidays, which – to say the least – was pretty crummy. I was facing rejecting from job interviews like I had never faced before (since it had never happened to me previously, I always got any job I went after). Not only was the job market smaller in Reno (especially for the senior positions), but my short stint at the last job and multiple jobs held not more than a year was being seen as unstable to potential employers. At one point I was getting close to desperate, so I decided to get creative in my job hunting. I started scouring websites of local companies in search for emails of CFO’s. I would reach out to them directly to see if they were in need of someone with my particular skill set. It just so happened that one CFO was looking for what I had, so we met for lunch and thereafter I was hired on as the senior accountant.
I was grateful for the job and I certainly gained experience in a multitude of new industries –entertainment, sports, restaurant, and retail. I used my knack for process improvement to enhance the accounting procedures. They became so efficient, in fact, that my work-load diminished to less than a 30-hour week for me. I was starting to feel stuck in a rut again. I couldn’t help but feel that I wasn’t meant to be trapped in a regimented accounting job working for The Man. I had a gift for implementing great change. Once that great change is working consistently, I need to move on to another change project.
When the CFO approached me about the opportunity to pursue entrepreneurship again and keep them on as my first client, I jumped at it! I knew that a stable client was part of what I was missing the first time around. They were a reputable establishment in the community which would add to my credibility, plus it was enough work to support me financially so that I could avoid taking on any debt this time. Money was tight for a while, but I pushed through and am now in a comfortable place. I started my MBA this semester (I only have one final left, woohoo!) and am proud to say that paid my tuition in cash and plan to do so until I graduate in May 2018.
Working for myself certainly has its ups and downs. I am working towards financial freedom and flexibility in my schedule. Right now I am working long hours and often don’t break on the weekends, but I will tell you it’s damn rewarding since I’m doing it for myself. I also get to spread my love of accounting and process improvement to other business owners, which I feel so fortunate to do. I’m always meeting new people, learning about their businesses, hearing about their journeys, and if I’m lucky enough, I get to join in on their journey and make a positive impact. That is what entrepreneurship is all about my friends!
Reno has been pretty darn fantastic to me, both for my personal and professional lives. If you’re thinking about making that huge leap into being a solopreneur, are thinking about moving to the Biggest Little City, or both, I invite you to jump fast and steady and know that you will land with both feet planted so that you can walk – then run – towards your dreams.
We’re now a full week into the month of May. The rain has been falling, the sun is shining, and flowers are in bloom. It’s an especially great season since tax time is now just a distant memory, right? WRONG! If you’re like most small business owners, you probably wait until January, February, or maybe even as late as April to start checking your list of items needed for your tax preparer. Does waiting last minute give you anxiety? Does waiting last minute put you into a time crunch and keep you up at night?
Instead of dealing with the stress and time constraints of this situation every year, wouldn’t you rather just keep swimming along after year-end in the same manner as the rest of the months? Today, I’m going to give you some tid-bits of advice on how to accomplish this consistent swimming and avoid the tax-time drowning.
Keep Your Receipts
This is probably one of the biggest organizational problem I’ve encountered in the past, both with clients and employers. Keeping your receipts, ALL of them, is your best line of defense. Keeping them organized, just by month, or type, is even better! As a new business, your bookkeeper or accountant will thank you for having documentation for every purchase or deposit made. Plus, if you are ever audited by the IRS, you already have your backup ready to go. No stressful calls are needed to try and track down a receipt from 10 months ago to show that the large purchase you made at Best Buy was indeed for business purposes.
Retain Copies of Your Statements
Whether you do this digitally or print them out each month, retain copies of your monthly statements. This includes checking, savings, credit cards, and other sources like PayPal. Again, your accountant will thank you later. Plus, creating this routine will likely force you to at least look at the statement and quickly glance over for any issues (What?! I had 3 overdrawn checks this month? I need to see if that’s a bank error or if I have a cash flow problem!)
This is the most straight-forward advice I can give! The earlier you start, the easier the on-going record process is. Think about being offered a whole pecan pie, but you also must eat it in one sitting. Sounds painful, and maybe impossible, right? But what if you were able to eat it just a bite at a time until it was gone? That’s what monthly bookkeeping is all about. Breaking it down into more manageable bites.
You’re also better able to proactively fix errors, follow-up on monies owed to you, and more efficiently track bills coming due when you have a consistent record-keeping process in place. And if you hate the idea of doing this task so regularly, hire someone who enjoys doing it so that you both benefit from the timely work.
If you’d like to start working on your manageable bites together, CONTACT ME to schedule a free consultation.