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Blog: Minimizing Financial Clutter
52 WEEKS TO FINANCIAL ORGANIZATION - #29: Beyond Reconciliation



My old roommate used to say, "I must have money in the bank, because I still have checks left!" Unfortunately, she was serious.  When I told her that no, that may not be the case, and that she should reconcile her checking account with the bank every month, she told me that, why yes, she does reconcile her bank account every month.  Her method?  When she got her bank statement in the mail, she simply wrote down the ending bank balance in her checkbook, assumed the bank must be right, and went right on writing checks.   Never mind the checks she had already written that weren't on the bank statement!  (Obviously, this is NOT the way to balance your checkbook, so don't try this at home!) 
 
Even today, especially today, with so much electronic banking, it's important to reconcile your bank accounts monthly.  Banks do occasionally make mistakes.  For example, when the check scanner reads your $200 check as $2,000 instead, you could have a problem.   Doing the bank reconciliation is also a reality check for you.  You can see up-close-and-personal exactly how much money is coming in and going out.  And with debit cards and ATMs, it's real easy for that money to go out!
 
Over the last couple of weeks, though, I've come across a bigger problem with several bank accounts.  The bank reconciliations had been done, and they all balanced to the penny.  The problem arose when we tried to create reports about the sources and uses of the money. 
 
You've heard the phrase, "garbage in, garbage out"?  Well, that's what happened.   When we tried to create reports of income and expenses, they didn't make any sense.  The reasons?  Bank deposits were made, but no one bothered to record the source of the revenue.  Was it taxable income?  From whom?  Was it from a rebate check or an insurance reimbursement?  Was the deposit from more than one source?  What about the expenses?  To whom was check #1492 written?  And WHY was it written?  Was the check to Baltimore Gas & Electric recorded as an "auto fuel" payment instead of a "gas and electric" payment?  Garbage into your bookkeeping results in garbage out in your reports.
 
The bank doesn't care about the sources and uses of your money, but you should.  I don't know about you, but if I don't write things down when I think of them, the thought is gone forever.  It's REALLY HARD to remember a month or so later when I sit down to reconcile my bank statement if I didn't enter the transactions in my check register (or accounting software) when I made them.
 
Some Good Reasons to Record Your Sources and Uses of Money
         So you can track where your money comes from and how you spend it
         So you can compare your budget to your actual income and expenses
         So you can more easily gather information for your tax returns
         So you can quickly spot unusual or fraudulent transactions
 
Your Homework for This Month
1.       If you don't already do so, your homework for September is to assign an income or expense category to every transaction you make whether it be by check/debit card or by credit card.  Use a paper or electronic check register.  For credit card purchases, simply write the expense category on the sales receipt and keep the receipts together in an envelope until the statement comes in.
 
2.       At the end of the month, make a spreadsheet of your income (bank deposits) and expenses by category, using your check register and credit card sales receipts.  (I'll remind you to do this step at the end of the month.)
 
3.       Total the amounts for each category, and create a report of the sources and uses of your September income.
 
And you still have to do your bank reconciliations!
 

posted on: 8/30/2009 11:30:00 AM by Katherine Trezise
category: Finances


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by Computers & Tech on 9/17/2009 10:10:10 AM:

Hey there, Nice blog, I just came across it and I am already a fan.


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Minimizing Financial Clutter


by Katherine Trezise

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About Katherine:

Katherine Trezise is president of Absolutely Organized, based in Baltimore, MD. She is president-elect of the National Study Group on Chronic Disorganization. Katherine holds a masters degree in business administration, is a Certified Professional Organizer® and a Certified Professional Organizer in Chronic Disorganization®. Absolutely Organized specializes in helping people organize their homes, paperwork and financial records to make room in their lives for the things, people and activities that are most important to them.

Katherine's Website:

www.absolutely-organized.com




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