Running a business can feel like juggling a dozen tasks at once. From managing employees to serving customers, it’s a whirlwind of activity. Amidst all this hustle, you might wonder why it’s necessary to reconcile your bank accounts and credit cards. We find that it’s often the last thing that owners want to deal with, yet knowing where you stand financially is one of the most important aspects of running a successful business.

We often find that a simple misunderstanding can block application, so let’s look at a few key terms and their definitions.

First, what does it mean to reconcile? Think of it like this: Imagine you have two lists—one from your bank or credit card company showing your transactions, and another you’ve kept to track your spending. Reconciling is about making sure these lists match up perfectly.

Now, why bother with this reconciliation process?

There are reasons to bother, we’ll focus here on a few.

The first benefit is spotting mistakes. Just a few weeks ago I was reconciling a bank account and a credit card I found I had been double charged for a service. Thank goodness I looked! Just like how you double-check your work in school to catch mistakes, reconciling helps you find errors. Sometimes, banks or credit card companies might need to correct their recording transactions. By comparing your records with theirs, you can catch these errors early and correct them.

Who wants to pay overdraft fees? – not me! Imagine writing a check or making a payment, thinking you have enough money in your account, only to find out later that you didn’t. And then the check bounces. How embarrassing! In addition to your ego taking a hit, this can lead to overdraft fees and other penalties. Reconciling helps you avoid these unpleasant surprises by ensuring you always know exactly how much money you have available.

Ah, taxes—the inevitable part of running a business. When tax season rolls around, having your accounts reconciled can save you time and headaches. I saw one person have to pay upwards of $800 to get someone to help get their records straight to be able to do their taxes. Regularly reconciling your records will save you future headaches and expenses around tax time.

It may seem like a mundane task, but it is an extremely vital part of business. Consider it like a regular health check-up. It helps you catch problems early, stay on top of your finances, and make informed decisions.

So, even though it might seem like one more thing to add to your already busy schedule, it’s well worth the effort for the peace of mind and financial stability it brings to your business.

If you have any questions, or like to schedule a call with Kaeio, click here