Saturday, March 26, 2011

Reconciling Checking Accounts - Electronic Transactions

Reconciling or balancing the checkbook ensures that we've recorded all transactions for that statement date.  Today more people are using electronic forms of payments such as ACH - Automated Clearing House, EFT - Electronic funds transfers, Bill Pay - a service some banks provide that send a paper check to the payee you've instructed via web site authorization, Wire Transfers and Debit cards.

ACH is most often used when transferring or paying loans or credit card accounts.
EFT is used when your bank withdraws funds from your account for their fees.
Bill Pay is when you'd like to pay electronically, but they do not accept electronic payments, so the bank prints and mails a paper check.
Wire Transfers are usually reserved for larger sums of money.
Debit cards are typically used for daily expenses, office supplies, postage, lunches etc that you would write a check for if you carried your checks with you. 

When recording these transactions in your accounting software, you will want to use the write check option.  Even though these are not "paper checks" that you've written or printed, they are still the same type of transaction. 

What I see happening with inexperienced bookkeepers is they reconcile bank statements but leave unreconciled electronic payments in the check register.  In other words, they've recorded a transaction that never happened.  Electronic transactions are not like paper checks that haven't cleared the bank yet because they were sent near the end of the month and haven't been cashed yet.  Electronic transitions DO or DO NOT happen.  If you've recorded an electronic payment that did not clear your bank within a day or 2 of the actual transaction, take a good look at the receipt.  Very often credit card receipts are mistaken for debit card receipts or even cash receipts.  If it was indeed a debit card transaction, did it happen the last day or two of the month?  I this case it most likely will clear the first day of the next month, so you can leave that as it is.  If you've recorded a transition for an amount other than what it cleared the bank for, you must edit the transaction in your accounting software to reflect what truly did happen.  Then you will have to research if this was an over or under payment and how to rectify it.

Reconciling is pretty black & white, it either cleared the bank or it didn't.  More on posting to proper accounts later.

Saturday, March 19, 2011

Welcome

We're not at all like other bookkeeping services.  As a matter of fact, our business model is really quite poor, for us, and excellent for our clients.  We work very hard to teach you what you need to know to run your business and how to do the bookkeeping yourself.  We're extremely passionate about educating our clients about bookkeeping and understanding their financial statements.  Our motto is "Dedicated to helping our clients achieve success beginning with proper record keeping." and our mantra is, "Inform, Educate & Empower!". 

We want our clients to feel comfortable with their bookkeeping, and understand how the cash flows through their businesses so that they can make informed financial decisions.  We want you to do as much of the bookkeeping yourself as possible, to save you money.  We work ourselves "out" of jobs all the time.  Once people are comfortable with the bookkeeping they no longer need us at the moment.  As you grow and become more successful we're there to help do more of the bookkeeping for you.  Unlike other bookkeeping services that try to "do it all" for you, so you can go do what it is you do to make money.  That model is great for the bookkeeper, but unfortunately does not work so well for the business owner.  Without a solid understanding of your companies financial statements and cash flows your operating in the dark, and most often that spells disaster. 

Small Business Association - State Economic Profiles  http://www.SBA.gov/content/2010-small-business-profiles-states-and-territories

The facts are grim, the economy is brutal, yet when armed with the proper financial information you can not only survive an economic downturn, but you an also thrive!