Bookkeeping, Controller and CFO Services | The Quantify Group

Reconcile, Reconcile, Reconcile!

Since my last article, the Philadelphia sports world has been particularly quiet.  The biggest news has come from the Sixers during the NBA free agency period.  As most of you may know, the Sixers recently drafted Markelle Fultz with the #1 pick in the draft.  He will be paired with Ben Simmons in the starting backcourt to open the season.  The starting frontcourt consists of Joel Embiid, Dario Saric, and most likely Robert Covington.  Although Fultz is projected to be the starting shooting guard, he isn’t quite yet on the level of Klay Thompson or Steph Curry.  So, with $40 million of salary cap space, the Sixers made some solid free agent signings in J.J. Redick (shooting guard) and Amir Johnson (power forward).  Although both players won’t put them over the top, they will provide some veteran leadership in the short-term.  Redick should be able to fill our needs at shooting guard and Johnson will split time with Saric to take some burden off him.  The best part of these signings are that both players were signed to one year deals.  So, depending on how the season progresses, both could be used as trade bait to keep furthering The Process.  I don’t know about you, but this is the first season that I have been truly excited to watch in a long time.  Now we just need everyone to stay healthy this year!

Hopefully you had a spare minute to read my article about cash flow management a few weeks ago.  The first item on the list that business owners should do is to reconcile their cash flows in all of their accounts (checking, savings, petty cash, etc).  I know this sounds very basic, however, many clients I have worked with in the past do not do this until year-end or do not do it all.  Not only did this cost them hundreds of dollars in over-draft fees, it also hampered basic decision-making processes at certain points of the year.  For those of you who are unsure of how to reconcile cash or if you need a refresher, below are the steps to an accurate reconciliation.

  • Pick your cut-off date.  Whether you want to reconcile daily, weekly, or monthly, make sure you pick a hard date to start your reconciliation.
  • Download your bank data.  If you are reconciling on a daily or weekly basis, go online and download all of your transactions as well as the cash balance through the date you are reconciling.  If you are reconciling monthly, download the bank statement or use the paper copy you received in the mail.
  • Compare bank transactions against your accounting system.  Going transaction by transaction, check off (or highlight) each transaction that was input into your accounting system.  As you are going along, make sure that the transactions are also entered correctly and adjust if necessary.  If you note any un-entered transactions, record them.  If this is not your first reconciliation, take a look at the prior period’s reconciliation to ensure you are not double-entering transactions that were outstanding from last period.
  • Reconcile unposted transactions.  Once all of the bank transactions are entered, take out your check book or check register file.  Make a note of all checks written during the period that have not yet cleared the bank.  Next, do the same for all deposits in transit.  From there, move on to electronic payments (bill pay, etc) or electronic receipts (merchant deposits, etc) during the period that have not yet cleared the bank.
  • Look for bank errors.  Banks do make mistakes from time to time.  Double check the checks you wrote and deposit slips to ensure that there weren’t any transposition errors or other issues.  If you find something, notify your bank immediately.
  • Calculate the adjusted cash balance.  In general, this will equal the cash per the bank plus deposits in transit, minus outstanding checks/ACH’s, plus or minus bank errors.  The resulting number is your true net cash balance.

Hopefully this article will help move you in the right direction with regards to managing your business’s cash flows.  You can also use this information for your personal finances as well.  Should you have any questions please feel free to contact me directly!

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