Tag: financial-management

  • If you’re not reconciling every month, your books are lying to you

    If you’re not reconciling every month, your books are lying to you

    Sarah thought she was on top of her game. Her financial advisory practice was thriving, client assets under management were climbing, and she’d finally hired that associate she’d been putting off for months. But when her CPA called in March with a bombshell about her year-end financials, her confidence crumbled faster than a house of cards.

    “Your books show $47,000 more in revenue than what hit your accounts,” he said, his voice carrying that particular blend of concern and frustration that accountants reserve for moments like these. “We need to figure out where this discrepancy came from.”

    Sarah’s stomach dropped. She’d been diligent about entering transactions, tracking client fees, and monitoring expenses. How could her books be so far off?

    The answer was deceptively simple: she hadn’t reconciled her accounts in eight months.

    The Silent Killer of Financial Accuracy

    Here’s the uncomfortable truth most financial advisors don’t want to face – your bookkeeping software doesn’t talk to your bank. Those automated feeds? They’re helpful, but they’re not foolproof. Duplicate transactions slip through. Bank fees get miscategorized. That $2,500 client payment you recorded? It might have bounced, but your books don’t know that yet.

    Without monthly reconciliation, these small discrepancies compound like interest, creating a financial picture that’s increasingly divorced from reality. You’re making business decisions based on phantom numbers, and that’s a recipe for disaster in our industry where precision isn’t just preferred – it’s required by regulators.

    First—What Does “Reconciling” Actually Mean?

    Reconciling is the process of comparing your accounting records against your actual bank and credit card statements. You’re verifying that what’s in your books matches what’s in reality.

    It’s not just about spotting duplicate transactions or catching a typo. It’s about making sure the cash in your accounting system is the same cash your bank says you have. That means you’ve accounted for every deposit, expense, refund, fee, and transfer—accurately and completely.

    When done right, it’s the financial version of checking your mirrors before changing lanes.

    What Happens When You Don’t Reconcile?

    Let’s be blunt: bad data leads to bad decisions. And unreconciled books are filled with bad data.

    Here’s what happens when you skip monthly reconciliation:

    • Cash flow looks stronger than it is. Uncleared checks, duplicate deposits, or missed fees distort your balance.
    • Expenses are understated. Especially if you rely on credit cards or auto-drafted payments. Those don’t always get captured correctly.
    • You overpay (or underpay) taxes. That opens the door to penalties or audits.
    • Your reports lie. P&Ls, balance sheets, budgets—everything you base decisions on becomes suspect.
    • You lose credibility. Lenders, partners, and even your CPA will start to question the numbers.

    I’ve seen owners run profitable businesses on paper while bleeding cash in real life—all because they weren’t reconciling.

    The Real-World Fix: Build a Monthly Close Process

    Reconciling doesn’t have to be a heavy lift. But it does need to be part of your monthly close routine. Here’s what a clean, real-world process looks like:

    1. Download your statements. Don’t rely solely on the bank feed. Pull your official bank and credit card statements.
    2. Categorize and match transactions. Use your accounting software’s reconciliation tool (e.g., FreshBooks “Reconcile” function) to compare and match line by line.
    3. Investigate discrepancies. Any unmatched transaction needs attention. Is it a timing issue? A duplicate? A missing entry?
    4. Clear uncleared transactions. Old outstanding checks or deposits that never hit? Deal with them. Don’t let them linger for months.
    5. Reconcile petty cash, PayPal, and merchant processors. If it touches money, it needs reconciliation.

    Bonus: Always reconcile before running reports or doing your monthly financial review. Otherwise, the data’s garbage.

    Tools That Actually Help

    Don’t overcomplicate this. You don’t need expensive apps or flashy dashboards. What you need is consistency and clarity.

    • FreshBooks has a solid built-in reconciliation feature. Use it.
    • Bank Rules save time but need to be reviewed regularly.
    • Reconciliation Reports—save a PDF copy each month as part of your documentation trail. If you’re ever audited, this becomes gold.
    • Checklist in Notion, Google Sheets, or your task manager. Build a simple workflow you follow every month.

    This isn’t sexy work—but it’s foundational. Skip it and everything else cracks eventually.

    Final Thought

    You wouldn’t sign a contract without reading it. Don’t trust your books without reconciling them.

    If you’re behind, start fresh this month. Reconcile one account. Then the next. Get back to baseline and make it part of your monthly rhythm. It’s not optional. It’s not “nice to have.” It’s non-negotiable.

    Too busy to dig through your books every month? If you’re ready to hand off your bookkeeping to someone who actually understands business, get in touch. You run your business—I’ll keep the numbers honest.

  • 7 Common Bookkeeping Mistakes Financial Advisors Make With Their Books

    7 Common Bookkeeping Mistakes Financial Advisors Make With Their Books

    Financial advisors spend their days helping clients navigate complex financial landscapes, yet when it comes to their own bookkeeping, many fall victim to surprisingly common pitfalls. Here are the seven most frequent bookkeeping mistakes financial advisors make when managing their own business finances.

    1. Mixing Personal and Business Finances

    Despite advising clients against this very practice, many advisors fail to maintain clear boundaries between personal and business expenses. Using the same account for both creates a messy audit trail and makes tax preparation unnecessarily complicated. Establish separate accounts and credit cards exclusively for your practice.

    2. Procrastinating on Record-Keeping

    We’ve all been there—letting receipts pile up and bank reconciliations slide until tax season looms. This creates a stressful crunch time and increases the likelihood of errors. Set aside weekly time to update your books while transactions are still fresh.

    3. Misclassifying Expenses

    The financial services industry has specific expense categories that can trip up even seasoned professionals. Incorrectly categorizing compliance costs, continuing education, or client appreciation expenses can lead to missed deduction opportunities or regulatory issues. Create a chart of accounts tailored to your practice.

    4. Neglecting to Track Billable Hours Properly

    Many advisors use fee structures that include hourly components, yet fail to implement robust time-tracking systems. This results in revenue leakage that can significantly impact profitability. Invest in user-friendly time-tracking tools that integrate with your billing system.

    5. DIY Syndrome When You Should Outsource

    Financial advisors often have a “I should know this” mentality that prevents them from delegating bookkeeping tasks. Your expertise lies in financial planning, not necessarily in the nuances of small business accounting. Consider hiring a bookkeeper who specializes in financial advisory practices.

    6. Overlooking Technology Solutions

    Too many advisors rely on outdated accounting methods when modern solutions could save time and improve accuracy. Cloud-based accounting software with financial industry integrations can automate bank feeds, categorize transactions, and generate meaningful reports that help you make better business decisions.

    7. Insufficient Planning for Tax Obligations

    Financial advisors understand tax planning for clients but sometimes neglect it in their own business. Failure to set aside enough for quarterly estimated taxes or overlooking state-specific requirements can lead to cash flow crunches and penalties. Create a dedicated tax savings account and make regular deposits based on projected liability.

    Remember, as a financial advisor, your own books aren’t just about compliance—they’re a vital management tool that provides insights into your practice’s health. Clean, accurate, and timely financial records enable better business decisions and demonstrate to clients that you practice what you preach.

    Taking the time to address these common bookkeeping mistakes won’t just reduce stress and potential compliance issues—it will likely improve your profitability and business performance. After all, the financial habits you recommend to clients should start with your own practice.

    Final Thought

    You don’t have to do your bookkeeping — but you do need to make sure it’s getting done right. Outsourcing to someone who understands advisory firms means you can get accurate, timely books without the headache.

    This newsletter will help you get there.

    And, if you’re looking for a bookkeeping partner who speaks your language, check out Becker & Ledger — we make clean books simple, so you can focus on your clients.