When it comes to handling a business, it can be easy to ignore the importance of administrative practices that go into running one. For some, the nuances of admin work may impact their day-to-day job directly, while others focus more on the logistical side of scaling their business. Regardless of where your responsibility falls as a stakeholder, the two go hand-in-hand.
So, how can you begin setting your company up for long-term success? By starting small and streamlining your finances. Specifically, start by assessing your account reconciliation tactics.
What is Account Reconciliation?
Account reconciliation (referred to by some as reconciliation in accounting), in lamest terms, is the process of matching every dollar available for spending with every dollar spent in business expenses. Typically, account reconciliation is done monthly, weekly, or sometimes daily. It serves to assure that every dollar earned is accounted for, and to assure there aren’t any signs of employees misusing company funds (typically considered fraud) when balance sheet reconciliation time comes around.
Business owners that oversee a small company- typically only a few employees- often do their own accounting. Those that deal with companies a bit larger, however, often have accountants that are responsible for handling account reconciliation. This reconciliation in accounting usually requires a strong level of accuracy to avoid mishaps in matched transactions.
How can Streamlined Reconciliation Help your Business?
There’s more than just one reason streamlined (efficient) account reconciliation tactics can do wonders for your business. It can protect your bottom line, verify honest cash flow spending, help you stay on budget, close cash flow loopholes, and provide accurate insight that can help you optimize/scale your spending smartly. Sound complicated? It’s not. It’s quite achievable with the right steps (and the right software) in place.
5 Simple steps to achieve streamlined reconciliation
Eliminate Card Sharing, Cash Stipends, or Employee Reimbursement
- Admin officers to make purchases on behalf of their employee
- Employees pass around a singular payment card to make purchases
- Admin’s hand out cash stipends to employees
- Employees to pay out-of-pocket from their personal funds to later be reimbursed from the company
- Admin officers face disruption in their busy schedule to make purchases for their employees at whatever location they’re at
- Employees may need to purchase supplies at the same time, but in various locations
- Cash is loose and less trackable, increasing the risk of employee fraud, losing those funds, and inaccuracy amongst your balance sheet reconciliation due to lack of transaction visibility
- Employees must wait for their money to be given back to them at the discretion of your company’s reimbursement schedule (typically monthly reconciliation schedule), which also requires increased check writing for your admins
Track Transactions in Real-Time
Eliminate Physical Receipt Collection
Integrate Your Accounting Software
Automate Your Transaction Coding
Believe it or not, achieving healthy reconciliation processes starts from your point-of-spend. From construction to home healthcare, most businesses with multiple personnel have employees that need to purchase supplies to complete tasks. Many of these purchases could require:
So, what’s wrong with these processes? Each can cause disorganization and inconvenience for both your admins and your employees, respectively. How?
If these traditional point-of-sale methods create more complications, what’s the solution? Give each employee their own individual card that can set both spend controls and track each transaction accurately. That way, you can eliminate these methods altogether and give employees an option to pay directly from a company account safely, without needing their personal money.
Think bank statement but for any employee spend at all times. That’s the kind of insight needed for admins to know exactly when and where company funds are being used. Doing this keeps your vendor reconciliation organized by time and place, and it helps admins identify transactions that look suspicious at a much faster response rate. It’s a proactive way to protect your cash flow and stay ahead of any red-flagged transactions that cause hiccups when matching receipts.
When monthly reconciliation time comes around, it’s time to match your receipts to each dollar spent. If you currently use any of the above spending methods, you (most likely) have a stash of receipts filed away in a folder or cabinet somewhere. Excited to sift through each one? You sure wouldn’t be. Then there is the possibility you don’t even have all the receipts you need to match transactions accurately. What happens when employees aren’t timely with getting them to you? That could be problematic.
Maybe you’ve decided having employees submit expense reports is the best. Although it seems like the most practical alternative, having your employees submit receipts digitally into one condensed area makes the most sense. Yes, there are easy reconciliation software solutions that allow you this option.
When you need the receipts internally for audit reconciliation purposes, it’s best to have employees submit and digitally file everything in one cloud-based system for easy reference at any time. No more scrambling for every piece of paper when needed. No more sifting through stacks. No more individual expense reports to look through.
Hopefully by now, you’ve adopted an accounting software (I.e. QuickBooks, QuickBooks Online, SAP, XERO, etc.). The reason being: they help you keep your coded transactions filed digitally. Now take this concept a step further and import all your general ledger codes (and other related coding methods) into a reconciliation software that tracks your transactions in real-time. At that point, you can pinpoint transaction line-items associated to each card with ease and code them as you go. Then, on the backend, everything (including receipts) shows up already completed in your accounting software with automatic sync integrations. Balance sheet reconciliation never felt so accurate.
Imagine: an accountant that rarely needs to manually code transactions. Its more than just possible; Its a completely attainable reconciliation process. The right reconciliation software will allow you to create a customized reconciliation template with “rules” that can automatically assign your imported bookkeeping codes to transactions with similar attributes as those that proceed it. Whether its by merchant category, merchant, or transaction amount, transactions will be auto reconciled as they happen.
The Bottom Line
If these steps seem daunting, they aren’t. It boils down to one dependency: finding the right reconciliation software that can simultaneously make each step possible. Today’s technological capabilities provides a “pandoras box” of options. It’s about finding the right one for your company. If your end goal is to ultimately scale your business, software like this is not just crucial- it’s essential. Start by making sure your reconciliation accounting is seamless.