Everyone hates reconciling.
At best it is just tedious and time consuming. At worst it is intensely frustrating. So why do it?
For one thing, it will save you money. By reconciling you will often catch mistakes: income or expenses that have been incorrectly entered, assigned to the wrong building or expense category, or simply not entered at all. These are most often expenses that could be set against taxes, but can’t if you can’t show what they are for.
If you are operating as a sole proprietor you accountant may well not look at your bank statements, and then these errors will be missed totally. If you are set up as a corporation, they will probably want to do the reconciling themselves, which will then cost you big time.
And then if the tax man comes to do an audit – well you will definitely wish you had done the reconciliation then.
The Wrong Way to Reconcile
Put all the receipts in a big box and give them to your bookkeeper, or do them yourself, at the end of the year. Here is what will happen:
- Some of the receipts will have gone missing. You will then have items on your bank statement for which there are no records. Your bookkeeper will call you up and say, ‘There is an expense for $293.56 on February 27th. and also a deposit made on June 3rd for $573. What were these for?’ To which you will reply, ‘I haven’t got a clue! That was months ago!’ You will then spend hours trying to find the receipts, or looking through your old emails to see if you can remember what they were about.
- Some of the receips will have faded and be illegible. Or won’t have enough details to remind you what the expense was, or which unit it was for.
The end result will be a lot of wasted time and expense. Just giving it to the bookkeeper doesn’t help, as she will still bug you to know what expense xyz was for. This strategy only works if you have only a very few receipts beyond the regular scheduled expenses (such as property taxes) and if you have only one rental unit, or don’t care to assign the costs to different units.
The Stress-Free Way to do it
- Set up your utilities bills to be automatically imported into RentMaxPro.
- Enter your receipts as you walk out the store by using your phone.
- Set up your pre-authorized debits in RentMaxPro so that the expenses get automatically inserted each month – and are properly asigned to the right building etc.
- Enter your tenants’ rents as and when they get paid.
- Do the reconciliation each month when your bank statements come out. You can do it yourself, or give your bookkeeper access to do it.
If you do this the following will happen:
- A photo of your receipts will be stored in RentMaxPro, attached to the expense, so it can always be found to prove the expense. No more lost receipts.
- All the expenses will be already entered, all you have to do is match them to the bank statement entries which is just a matter of a few clicks.
- Any errors will become immediately apparent – and you stand a good chance if remembering what it was all about.
- Your bookkeeping and accounting costs will plummet, or vanish completely.
- Your tax bill will be lower – and hassles with an audit will be minimized.
- You stress will vanish, and life will be happier.