The holidays are over, and it's time to reconcile the budget. It has been a successful year for you so far—you've grown your business, increased sales, and have quite an impressive profit margin. But now that the season is winding down, it's time to take a look at where you spent all of that money.
And that's when the problems start.
Expense reconciliation is a tedious, time-consuming process that eats up hours of your workday. Business owners and finance teams lose valuable sleep every month trying to close the books.
This post will walk you through how to reconcile spending faster.
Let's get started.
Reconciliation is the process of matching your actual expenses with what was recorded in your company's ledger during a certain period.
If the numbers don't match up, you'll want to make adjustments or corrections before they become too far off. You can do this by finding the mistake (could be an overbilling mistake, a missed expense, etc.) and making changes to fix it.
The process of linking each transaction that appears on your bank statement with the corresponding journal entry in your accounting software is one of those adjustments. You'll need to manually match every transaction, and it can be a long and tedious process if you're not careful.
Luckily, there are ways to make the process much simpler and save yourself countless hours over the year.
Businesses need to be able to effectively manage their cash and monitor their financial and operational activities.
Companies use the reconciliation process to verify that each payment was authorized, recognized and that receipts have been provided. Otherwise, you'll never be sure where the firm's money is going.
The reconciliation process helps you identify any discrepancies between what was invoiced and paid, allowing you to stay on top of your company's spending.
When you're aware of how much money is really coming in and going out, you can make better decisions about your business's future, potentially saving yourself time, stress, and money down the line.
Here are some tips for performing a quicker reconciliation:
If you're going to be reconciling spending multiple times over a single year, take steps before the end of the year to make sure you know where all of your money is coming from and where it's going to go. If you want to be thorough, set up a chart in Google Drive or Excel showing each transaction from January through December—this will pay off, especially when tax season rolls around.
Reconciliation is a necessary evil, but it's not something you can rush. If you find yourself rushing through this process, chances are there will be errors in your books—and that means hours of extra work for you later on when they're discovered. That could cost you money and stress (not to mention sleep), so plan ahead and give yourself enough time to properly reconcile spending transactions.
Instead of simply recording expenses in QuickBooks or Excel, try using mobile technology like Penny Inc to automatically track and log expenses.
There are tons of apps out there that can help you track spending and achieve reconciliation in a fraction of the time it takes with pen and paper.
There are also ways to automate expense reimbursements, saving you from yet another tedious process that wastes time.
Once you know where your money is going, you can identify which areas you need to work on when it comes to improving company expenses. That allows you to cut out unnecessary spending without sacrificing too much-needed services or infrastructure around the workplace.
If you have the time, enlist the assistance of your bookkeeper or accountant when looking over your company's financial records. These folks are trained in accountancy and know what to look for when they're reviewing numbers, so you can use their expertise to ensure that everything is in order quickly and effectively. There is just too much data to handle sometimes. A quick chat with an expert will save you plenty of time and headaches.
If you don't organize paper receipts in some way before you begin the reconciliation process, it's easy to lose track of which receipts go with which expenses—and that can turn into a major headache later on.
And that's where an expense management platform can come in handy. Such platforms can help your team scan their receipts into the system, where they are neatly organized.
Later on, you can use these receipts to quickly reference spending across numerous periods of time.
As long as your team is on board with this process, putting together expense reconciliations will go much more smoothly—and you'll have more time for the fun stuff.
The expense reconciliation process might seem like yet another unwanted duty on top of the many others you already have at work, but it can actually pay off in the long run.
If you take steps to make sure your business spends money responsibly and saves more than it spends, you're ahead of the game—and that means higher company profits.
Reconciling spending is one of those unpleasant but necessary tasks every entrepreneur has to deal with sooner or later—but it doesn't have to take hours, days, or even weeks out of your day. With great automation tools readily available to us these days, there is no excuse for avoiding this necessary part of any business cycle.
Hopefully, with these tips in mind, you'll be able to reconcile spending transactions quickly and efficiently so you can focus on growing the company itself.
