Some decisions you face as a business owner are optional. You can decide if you want to send a company holiday card or offer your employees coffee in the breakroom (though some might argue that the second one is a non-negotiable!).
However, reconciling your accounts is not an activity a landscape business owner can choose to opt in or out of. Accurate documentation of each transaction is essential to a healthy business. If you don’t have a (most likely electronic) paper trail, how can you really know the financial status of your business?
Reconciling your bank accounts, credit card accounts, and loans each month is crucial for staying informed of the health of your business, ensuring accuracy, filing taxes correctly when the time comes, and most importantly, ensuring profitability for your landscaping business.
So, how exactly do you reconcile everything?
It’s really a simple process of comparing and contrasting.
Each month, you should look at the transactions in each of your bank accounts and credit card accounts and ask these three questions:
- Is this transaction accurate? (Date and total cost)
- Do I have a receipt for this transaction?
- Have I categorized this transaction appropriately and accurately?
Doing this each month ensures that you can still recall the transaction and categorize it correctly.
Reconciliation can feel tedious, but investing the time for this task once a month will save you big headaches and possibly fees later.
Pro Tip: I like to put a recurring meeting on my calendar for me to block off the time to take care of my reconciliations.
Reconciliation Best Practices
In addition to the basic process of comparing the dollar amounts line item by line item, take a step back and examine if the other elements of the documentation are correct.
- Do you see areas where you can improve your profitability?
- Are there any overall process improvements you can make?
- Can this expense be set to a yearly billing cycle instead of monthly to save some money?
Incorrect categorization or dates can throw off your budgets and financial statements for that month. These errors could ultimately cost you money in the form of paying too many taxes and can also be red flags if your business gets audited.
As always, I’m here if you have questions. My team and I would love to talk through this process with you and help you identify ways to improve bookkeeping for your landscaping business.