The convenience of credit cards is difficult to ignore, and for many businesses, using them is second nature.
But while there is nothing wrong with using credit cards to keep a business running smoothly, failure to reconcile those accounts on a monthly basis, could see small businesses jeopardizing their very financial health.
More than being sloppy, a lack of monthly credit card reconciliation could have serious consequences for a small business. Whether you engage with professional bookkeeping in Coral Springs to help you keep on top of these accounts, or handle them yourself, monthly credit card reconciliation has the power to help you keep your business financially robust, and here’s why:
- It helps to plug invisible leaks
Over time, even the smallest of charges to your credit card, could result in a big, financial headache. Think about such things as duplicate charges, zombie subscriptions, and bank errors. From a vendor accidentally swiping your credit card twice, or subscriptions to services or software that you haven’t used for the past year, to errors made by the big banks, these seemingly innocuous leaks can quickly become serious problems that drain your operating budget if not spotted and dealt with promptly.
Working with a small business bookkeeping and accounting firm is the best way to plug any such leaks before they have a chance to impact your financial health.
- It provides you with superior protection against fraud
All too often, fraud doesn’t come in the shape of a multi-million dollar heist, instead, it’s disguised as a series of smaller charges that are designed not to be easily detected. By only looking at the total balance due column in your credit card accounts, you’ll likely never even know that you’re being defrauded, and the longer it goes undetected, the more money you lose.
By regularly reconciling your credit card accounts, you can make sure that every time your company credit card was swiped, that it was done so legitimately; with either your authorization, or that of a trusted team member.
- It offers clarity over cashflow
Without regular reconciliation, your credit card balance can quickly become a liability, as you don’t know what your true debt-to-income ratio is. Daily, or even weekly reconciliations give you a clear and accurate picture of what you actually owe, enabling you to make financial decisions that are far more intelligent and strategic.
- It eases the stress of tax season
Clean data is essential if you want your tax accountant in Coral Springs not to have to guess what was spent over the year on such things as travel and meals. When you start reconciling your credit card accounts as you use them, you’re making sure that transactions are already categorized, and easing the workload for your tax expert.
Nobody wants to be rooting around in the back of drawers for receipts with a tax deadline looming; regular reconciliation avoids this.
Credit cards are super convenient and used often by many businesses, which in and of itself, isn’t an issue. But when credit card spending is uncontrolled and unmonitored, those accounts can easily hide problems that when left undetected, have the power to take your business down. The solution is simple: monthly reconciliation. If you’re not already on it, there’s no time like the present to get started!