Alexandra Levits Water Cooler Wisdom Entrepreneurial Accounting Hows Your Reconciliation

Alexandra Levit's Water Cooler Wisdom Entrepreneurial Accounting How's Your Reconciliation As a business owner who does a fair amount of her own accounting, I come up againstreconciliationfrequently. And, as a business and workplace adviser to others, I recognize its importance. Reconciliation is part of the ongoing accounting mix that leverages two or more financial records to make sure numbers match. In other words, it helps owners and accountants demonstrate that the money going out of an account is equal to the amount spent, and that the amount coming in is equal to the amount earned. Account reconciliation provides a mechanism for accurate balancing at the end of each recording period. If you dont do it properly, you will move forward with compounding inaccuracies and will risk your business overall integrity. When I started my business in 2004, the newSarbanes Oxley Acthad greatly tightened the reins on reporting reliability. Although the law had the biggest impact on large corporations, it encouraged me to establish strong accounting practices. Ill admit that I struggled with account reconciliation. An ongoing problem involved client payments that arrived significantly after I declared the income. But fortunately, I never experienced strange inconsistencies I couldnt explain. Over the last 14 years, Ive witnessed and personally experienced the following reconciliation pitfalls I hope other business owners can avoid. Reconciliation Pitfall #1: The Dreaded Spreadsheet As someone who studies and applies future of work technology, Im embarrassed to admit that I left my spreadsheets kicking and screaming. I was comfortable with them and grossly underestimated the manual processes involved with reconciliation. I regularly spent hours trying to get to the heart of a single discrepancy and even then, sometimes couldnt overcome the danger of human error. Today, we have the advantage of much more accuratecloud-based solutionsto access real-time financial data from any device at any time and track the flow/monitor the status of each reconciliation. Just make sure you certify and secure your chosen system. Reconciliation Pitfall #2: Non-Standard Processes I cant tell you how many times I fell prey to this one. Id do reconciliation one way, my business manager would have another approach, and then our accountant would come in and use a third technique. As you can imagine, this lack of standardization was problematic. To avoid this pitfall, sit down with all relevant parties and draft your organizations reconciliation policies. Store them in an online system connected to your financial data, make sure anyone new coming into the organization understands them and knows where to find them and emphasize their importance. For more where this came from, check out the American Express Business site.