This Podcast Is Episode Number 519, And It's About Using Financial Reconciliation To Keep Your Construction Business On Track   As a small business owner, you're likely already aware of the importance of keeping your finances in order. Financial management goes deeper than paying your bills on time and collecting invoices (although those are also important). It involves regularly checking your financial situation to ensure your accounts are in order, your records are up-to-date, and you're spending within your budget. Among those activities, financial reconciliation is vital in keeping your finances and business on track. Force reconciliations can cause your net income to be over or understated, which means you pay too much in taxes now or too little now and the rest later with penalties and interest because the IRS can ask for a copy of your bookkeeping record.    Here's what you should know about financial reconciliation and how it can help your construction business. What is financial reconciliation? Financial reconciliation is a process of ensuring your financial records are consistent and accurate. When you conduct a financial reconciliation, you review financial statements and compare them with your bank statements, credit card statements, vendor statements, and other relevant financial records, such as invoices.  As you do this, you'll look for errors or discrepancies–for example, if a payment appears on your bank statement but not your accounting records or the costs are for different amounts on different records. When you conduct a financial reconciliation, you want to ensure that the money in your bank account matches the money your financial documents show you should have. Discrepancies need to be addressed, or you'll wind up with financial information that isn't accurate, which affects your cash flow and your ability to make financial decisions. If the discrepancy involves an ongoing payment to you or a vendor, catching it early could save you much money.   Financial reconciliation ensures that all financial transactions are recorded accurately and thoroughly in your accounting system. That way, you know exactly how much money you have and how much is moving into and out of your business, and you can make informed financial decisions.  Types of financial reconciliation Every business has different reconciliation needs, depending on how big, how many, and what types of transactions it has. Bank reconciliation involves your business's bank statement to your accounting records to ensure that all transactions have been recorded correctly. You're looking to safeguard your bank statement's bottom line matches your bank account balance. If not, you'll want to determine why. Is there an automatic withdrawal not yet posted to your account? If so, you need to be aware of it to prevent yourself from overdrawing on your account.  Credit card reconciliation involves reconciling your business's credit card statements with your accounting records to ensure that all charges have been recorded accurately. This is similar to a bank reconciliation in that you need to know exactly how much you've spent on your credit card–including pending transactions–to understand how much you have available.  You can also conduct vendor statement reconciliation, examining your vendor statements against your accounting records to ensure all invoices have been paid and recorded accurately. This can prevent any errors in paying your vendors.  You'll need to conduct intercompany reconciliation if you have two units of business or more–such as divisions, subsidiaries, or franchises. This is where you compare financial records between two or more companies to ensure transactions are recorded accurately and consistently. Why you need financial reconciliation Financial reconciliation is a vital tool that helps you manage your business more effectively. It ensures your financial records are...