Recently I seem to be acquiring a lot of unintended evidence to support what I’ve always suspected – many Small Business Owners (SBOs) do not pay enough attention to their bank statement.
The practice is to open the statement, glance briefly at the ending balance and if it vaguely matches the amount you have in your mind, then you “file” away the statement.
For those of you who have accountants, this bank statement is usually hustled off to them, often unopened.
I believe that this behaviour has very much to do with poor relationships to and with money. But I leave that for my friend and Money Management Coach, Nigel St. Hill, to deal with.
What I really want to help you with is how you make the best use of your bank statement to protect your money and your business. So, for starters, here are my favourite 7 quick tips to start you off…
What really is a bank statement?
It is a document from your bank showing all the activity attributed to your account for a period, usually a month. You can present them when asked for evidence of your financials transactions, and you can also use it reconcile the information in your own records.
Open your bank statement every month
This seems like unnecessary advice but so many SBOs don’t even bother to open their bank statements. According to them they are too busy doing business. Furthermore, they get into arrangements where the bank honors all their cheques. So now, they bask in the knowledge that they won’t be embarrassed by bounced cheques. But the charges for this! Remember: banks are always looking for new ways to make money and scammers are looking for new ways to scam.
Make sure the bank financial period is the same as yours
Sometimes the bank will run your banking period for example from the 4th of one month to the 3rd of the next. This means that you get a bank statement that is different from your period which might be the beginning to the ending of the month. If this is the case with your account, just ask the bank to adjust their statement date to the same as your financial period. This makes reading and comparing the bank statement so much easier.
What to do as soon as you receive your bank statement
Check for any unrecognized items, both withdrawals and deposits. If you discover any, bring these to the attention of the bank immediately. Treat deposits as important as withdrawals. You don’t want to be spending any money which does not belong to you.
It’s important to reconcile your bank statement with your records
SBOs are notorious for keeping poor records. Some write cheques and record the details in their records or fortunately, some banks provide duplicate. However, transactions done by debit cards are not recorded and so the owner has only a “sense” of how much money is in the account. Reconciling your records with your bank statement provides you with certainty about how much money you really have. In addition, it reveals any other errors and potential fraud.
Really scrutinize your bank charges
Yes! I mentioned at #2 that banks are always looking for new ways to make money. So part of the process of scrutinizing your bank statement is to really check on the charges. Make sure that they are in accordance with what you agreed with the bank. Check for items being charged twice (banks do that sometimes) and check for new charges which somehow you didn’t hear about before. Improve your cash flow by discussing with your bank how you can manage your banking to cut down on any charges.
Consider receiving your statements on-line
If you have on-line banking, consider the option of downloading your bank statement monthly. It increases privacy and security and the bank stores several months which you can access or you can download them and store them yourself. You also get your statement faster than waiting on the mail and it can be cheaper than your paper statement. The downside is that you may “forget” to download your statement and review it.
What to do next…
If you’re guilty of treating your bank statement like an unwelcome intrusion in your otherwise busy life, STOP! Right now.
Your bank statement is an important representation of your financial dealing, especially if you follow the advice I usually give SBOs. Pass all your money transactions through the bank.
Use the 7 tips above to start reviewing your bank statement, starting with the next one. If you’re already reviewing your statements, CONGRATULATIONS!
Now do share any tips you have which I haven’t covered…