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Is your cash flow dipping and spiking?

Remember when you were a child and your mother would sit at the dining room table balancing her chequebook? A bank reconciliation is the modern day version of that activity.

Whether you are an entrepreneur or simply managing your household finances a bank reconciliation is an excellent tool to help you manage your cash flow. It maps out the timing of the deposits and withdrawals in your bank account so that you can see when the optimal time is to pay bills, make transfers into your savings account and invoice your clients.

The largest benefits of mapping out your cash flow are avoiding unnecessary banking fees (usually incurred when you accidentally dip into the “red”) and timing large payments so that they don’t all happen at once leaving you and your bank account empty until the next deposit.

Ready to master your cash flow?

  • Step 1: Download this FREE bank reconciliation template.Excel Icon
  • Step 2 (applicable for entrepreneurs): Enter your provincial tax rate into the orange box (i.e. Ontario has 13% HST).
  • Step 3: Enter the date and your current bank balance into the pink boxes.
  • Step 4: Enter the dates, details and amounts of each of your expected bank deposits and withdrawals. A bank balance will calculate automatically.
  • Step 5: Identify the times in the month when your bank balance is the lowest and highest (HINT: if you’re in a negative position, cut your spending and/or push back the timing of your spending).
  • Step 6: Rearrange the timing of deposits and withdrawals so that you don’t have severe dips and spikes in your cash flow. This levels your cash flow which is helpful in pre-planning for automatic transfers.
  • Step 7 (applicable for entrepreneurs): Use the categories on the right to classify each withdrawal. This will allow you to identify how much you spend on things like office supplies and web services.

If you notice that at the end of the month that more money went out of your bank account than went into it (the yellow box), you’ll need to take a hard look at cutting back your spending to avoid running in the red month over month.

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