7 minute read
TO BE THANKFUL FOR..
FOUR REASONS TO GIVE THANKS FOR A RECONCILIATION
by Higher Accounting
o many reasons to give thanks this season. Although we may haveS
not returned to normal with the gathering of family and friends, we sure can be thankful for our health and loved ones that have survived the pandemic. This was a time where we could reset and rebuild our goals and our everyday lives. As we still are surviving this pandemic, we have had time to determine that our finances must survive it as well. Yes, you can thank your accountant as well for keeping you prepared all year long.
The almighty reconciliation is what keeps you on track in so many ways. With accounts reconciled, you can stay on top of your finances and keep them current and accurate. At any given moment you can be confident that you “know your numbers” and can make sound financial decisions.
Let’s discuss the four main accounts that you should keep reconciled for your cannabis business. Not only in business, but keeping this account reconciled will help you in your personal life as well. Maybe we double recorded a transaction or forgot to record one.
One great way to keep your account in the black is to balance/reconcile your bank account and credit card statements. Not only will you catch your own recording errors, but you may find that you are still being charged for that Hulu account you canceled a few months back or have been double charged for a bill payment.
Keeping up with the current month gives you time to correct transaction errors and take the appropriate action. The reconciliation process is very detailed work but is well worth it in the end.
Finding mistakes when they first occur, makes resolving them easier in the long run.
Keeping your bank and credit card accounts current will also prepare you for tax time. Basically, you are verifying your receipts and totals monthly. When December hits, you only have one month of records to complete and you are ready to send your documents off to the tax person. Can we say, well done! Keeping bank and credit cards balanced and up to date will keep money in your pocket both personally and for your business. If all else is lost, check your banking statements! Make sure that all charges are verified and legitimate. We tend to overlook the items with small dollar values, but they can add up. An additional $5 in missed transactions a month will add up to $60 a year.
To know your actual balance of your funding accounts can also save you money in unexpected fees. If you have miscalculated your balance, you may run the risk of over drafting your account. Depending on your bank, the fees can be huge. Just the timing of transactions can greatly affect your balance.
A matter of a few hours difference between a withdrawal and a deposit can end up costing hundreds in fees. Some banks may also charge minimum balance fees if your minimum balance falls below a certain dollar amount. To have the true total and balance to your accounts, you can time your transactions accordingly to avoid the extra banking fees.
Right next to having the money and the knowhow to run your business, compliance also ensures that your company can make money in the first place. Without compliance, you are not legal to be operating and that will definitely put a stop to any potential income. There are many levels of compliance whether it be maintaining a building is up to code or withholding taxes from an employee, you will find yourself contemplating if what you are doing is enough to pass the test. Two accounts for your focus of reconciliation will play a major role in your business maintaining a good status with compliance and regulation. Before anything else, make sure you are filing complete and timely compliance returns to your state agency. Keep your reporting as accurate as you can, and it will keep your business going. The consequence of violating regulations can include but not limited to fines that can be in the tens of thousands of dollars, the cause of business closures or slowdowns, and/or criminal charges.
A part of compliance in reporting is making sure you can back up those numbers. A critical part of recon and auditing is having the backup to validate your numbers. It’s one thing to say you have x amount, but it’s another to have proof of x amounts.
That can be the deal breaker or the life saver in an audit depending on if you have back up or not. As a checkpoint to your reports, you should periodically check your numbers against your actual physical count of inventory. They should match. If they don’t do some digging. It’s time to get your glasses on and find out what is missing and why. Why would you have discrepancies? There are Many things that can cause a discrepancy between physical counts and inventory reporting. Missing purchase invoices will understate your inventory and double entry of the same invoices will do just the opposite. Incorrect sales receipts.
Sometimes we make errors and end up listing the wrong items and/or quantities on our sales receipt. If there is no difference in prices of the items, you may not catch the error until you do a recon. #1 most common error is typing and keying errors. Do you have that fat finger that always ends up adding a digit? Don’t worry, we all do. A recon will fix that right up! Do you want to triple check your inventory? Do you manage your inventory through a Point of Sale (POS) or an inventory tracking system? Then you should already be familiar with reconciling your on-hand inventory against your data system. If not, you very well should be. Most software comes with training tutorials and a help desk. Utilize the free tools that they provide you to manage your system. At minimum you should be doing a physical count every 30 days at the end of the month.
Since your reports go from beginning of the month to the end, you should do your count at the end to provide the most up to date and current inventory data possible. Idealistically you would want to track weekly, even daily depending on your volume and movement structure. Maintaining a process and establishing standard operating procedures will deter theft because it shows that you care about your inventory and you track its movement. If you do happen to employ the one that doesn 't seem to care about your policies, tracking what, where, and when products went missing will become a lot easier.
It also decreases your risk of shrinkage by stopping the theft at the beginning stages when it is small. Many discrepancies that you will find when reconciling your reports are the same or similar kinds of errors you will find when reconciling your inventory system. The fourth account that you should keep reconciled is your cash account. This is especially true in the cannabis industry, which mainly deals in cash. With large amounts of cash flow in and out, it becomes necessary to reconcile regularly.
You must maintain a cash log. Record all ins and outs. Cash is the area in which money laundering occurs and is one of the first places an auditor will look for discrepancies. You must be able to track where your dollars are going. Since the cash account is the most common and vulnerable to lose and risk, it should be your priority for your recon list.
Large amounts of cash can also present the temptation of theft. Having cash controls in place will detour most thieves and if not, will help sift them out. If you don’t track how much money you should have, then you will never know when it is missing.
To utilize cannabis banking is by far the easiest and most secure way to track your money. However, if you must have cash, please keep it reconciled.
This may sound like a lot of work and that is because it is. The reconciliation process is tedious work and can take some time to accomplish. However, it will benefit you more than the time invested.
You will deter theft, save on fees, and have overall confidence in your finances and inventory. With all the money you save in discrepancies you can hire someone to do it for you!
If you have investors, it is a mustdo. Having asset accounts current will give you both a piece of mind. When you are on top of your inventory and cash control, you are protecting your dollars.
