You didn’t get into the interior design business to stare at financial statements all day every day – but if you do not have an interior design bookkeeper, that responsibility will fall on your shoulders one way or another.
Consistently tracking your finances takes discipline and keen attention to detail. Maybe you’ve always handled your finances with the attitude of “if nothing is majorly wrong in my bank statements, I’ll just keep pushing ahead.” Or maybe you always feel overwhelmed by your business’s financial situation and you don’t know how to stop stressing over every transaction you make.
The good news is that we have some advice that will bring clarity and peace when you open QuickBooks or your bank account.
We often see clients struggle to understand the difference between entering transactions into QuickBooks (QB) and reconciling their monthly bank statements.
Here’s what these practices are and why they’re different.
Entering transactions in QB is as simple as it sounds. This is when you create an expense in your Credit Card (CC) register or add an expense to your bank feed. Tracking your transactions weekly in QB will keep your finances well organized and ensure everything is in its place.
This is a monthly action that pertains directly to your bank, credit card, or loan accounts. It’s similar to entering your transactions because you’re actively reviewing your spending for the purpose of clarity and organization, but it serves a different technical purpose. Reconciling your accounts enables you to compare all of the transactions you’ve logged with the transactions that have actually cleared your account. Good practice in financial reconciliation is to review all the transactions that did not clear and determine whether they should be investigated further.
Maybe you deposited a check but it didn’t actually go through, or you accidentally logged a transaction for the wrong amount and you need to correct it.
These small errors may seem like just that – small. But especially when you’re operating on a business scale and making significant purchases, these “small expenses” can cost you significant amounts of money if your lack of organization gets out of hand.
Many business owners have a practice of entering their transactions in QB, but they don’t follow through on the related but distinct task of reconciling their transactions, and this is what causes certain purchases to fall through the cracks.
If you don’t verify your transactions monthly to ensure that your books and statements are accurate, your income and expenses could be over or understated.
This even applies to loan accounts, which are often overlooked in the reconciliation process. But if you’re making payments on a loan, those payments should be reconciled against the monthly loan statement so that you can ensure interest was accounted for and your loan balance was verified.
While these may seem like small distinctions, these are the very practices that can make or break the financial success of your business – but they don’t have to! Learning the basics of reconciling transactions and entering transactions in QB will equip you to move forward with confidence. AccountSolve offers accounting services and bookkeeping for interior designers like you – schedule a call today so that you can get back to your work and we can handle the finances.