 The other thing that people get confused about I think is the bank feeds and we'll talk more about bank feeds in a future section or course But let's just think about when the bank feeds might be useful and how you might set up a system It's usually the revenue cycle that gets a little bit confusing with the bank feeds So let's talk about it first. There's a couple different ways We might set up our revenue cycle and it'll be dependent on the industry as we've seen in the past We might for example have gig work the easiest thing Would be that we have like we're just getting paid by YouTube or something and we wait till it comes through the system We add it to our books using the bank feeds We get the information actually from the bank in that way and we might use a deposit form in that case We're actually constructing our books from the bank So there's not gonna be any timing differences that way because I didn't enter the revenue on my side I just waited till it cleared the bank and then recorded it It's still important to do a bank reconciliation But the bank reconciliation will be super easy and you can verify your cash account in real time Because it should tie out to what's on the bank statement or you're running bank balance Because you're creating your books from the bank statement But that's not usually what people do it what you can only do that if you're in a certain industry Where that's something you can do like if you're at a cash register for example, and you're collecting cash from clients you can't just put the cash directly into The into the to the bank you're using now a sales form So once you use the sales form at the cash register You're gonna want to check your cash to what you actually have in the cash register you're gonna compile all your cash together and usually you're gonna have to put it into that Clearant account undeposited funds or funds to deposit and then deposit it into the bank as one lump sum So in that case you can't for internal control purposes You can't just wait till you get all the money that you collected in the day and then deposit into the bank and then wait till the bank clears your cash to record it as a deposit in your system Because you want to record the sales as you make the sales and have the records of recording the sales possibly the customer names if you're Collecting that but at least the individual sales that were made you want to double check What's in your register to what's on the sales receipt for the day and so therefore you can't really do that You're gonna enter them into your system first and then you're gonna deposit it usually into the bank Yourself right and then you're gonna use the bank feeds if the bank feeds are on To double check to verify so now you have you've entered it on your side The bank is gonna enter it on their side and you could use the bank feed to double check It'll be the matching thing But the bank feeds not gonna record a new transaction generally in that case and the bank feeds are helping you to reconcile now So then you're not actually constructing your books from the bank You're you're using the bank as a double check That's what a reconciliation in a full service accounting system is designed to do the bank should be doing your books on their side You're doing your books on your side You're double checking the two the fact that you have two people doing the books and they reconcile They're the same except for timing differences outstanding checks and deposits Means that you have a double check and outside check that everything's going right if you if you have a full service Accounting system where you have to build a client then you've got an accrual component. You've got a counts receivable No cash impacted by this transaction although you're recording the revenue Then you're gonna receive the payment now you've got the cash And then oftentimes you might then have to do the last step of depositing as we've been doing in the practice problem and again in that case You're not gonna wait till the deposit clears the bank in Order to track when you're gonna record revenue and and usually when you're gonna record the deposit on your side Because you have you have to enter the invoice in order to track the accounts receivable So you see you can't just make you can't just make your books from the bank feed in that case Because you're required due to the type of industry You're in to invoice first and then receive the payment and then you're gonna use the bank feeds normally to double check The money that you've received now You could use bank feeds to kind of try to match to an invoice or or any part any node in the process here We'll talk more about that when we get into the bank feed section or course, but that's the that's the general idea It's really only that really simple business where you get in paid by a platform That you can just build your books from the bank feeds now on the vendor side many Businesses might be in a situation where they can basically construct their books from the bank feeds because it used to be that We wrote checks we wrote checks and checks take a long time to clear we write a check We send the check out we want to be able to verify if someone has an issue with the money that we pay them Whether or not we wrote the check number one and then number two did it clear has it cleared the bank So there's gonna be a big timing difference between when we write the check and when the check clears Because it has to be gotten by the other person and then deposited and then clear So if you're writing checks, you certainly want to enter the checks into your system So that you can track the unclear checks and you've got to do a bank reconciliation process to do that But a lot of businesses small businesses in particular are gonna do a lot of you know electronic many all business Are gonna do a lot of electronic transfers and if you're doing electronic transfers you don't have this big timing difference So possibly in that case You're just gonna you're just gonna set up automatic wire transfers for your telephone your Utilities and whatnot and all that kind of stuff and instead of you entering into them system as a check or expense form When you pay the bill you're just gonna wait till it clears the bank and then Record it with an expense or check type form as it clears the bank using the bank feeds So in a similar way as the deposit situation down here, we would therefore be constructing our books From the bank. We're not doing the double and we're not we're not double checking our books We're just building our books from the bank. Therefore. We're not gonna have any differences from the bank Therefore, we can we can still think of a bank reconciliation But it will be a quite easy bank reconciliation because our balance should match What's on the bank side of things because we're constructing our balance from the bank But if you're in it as larger companies usually then often will want to enter bills into the system So they can track when they're gonna pay the bill and try to pay it as late as possible Now you're entering an accrual component into the system and Therefore it's gonna it's gonna complicate you're gonna have a full service accounting system Where you're gonna have to track the bill and then you're usually gonna gonna make the payment And then when you pay the bill and then you're gonna use possibly the bank Reconciliations to verify to match not to record anything, but to double-check the recording the bank reconciliation is therefore being part of Or the bank the bank feeds being part of the bank reconciliation process So that's that's the that's gonna be the general idea with those two Those two kind of components that I think people get confused on now Just in terms of when the bank reconciliation happens if you're working in real time Typically, you're gonna enter the data for January You're gonna get the actual bank statement Sometime in February now a lot of people because we've got online banking and everything They want to just just go online and just print out something from their online banking to do the bank reconciliation You don't usually want to do that because the bank statement has the a very solid Line of this is where we stopped last time This is where we were at and this is where we're at as of the end of the month So they've very well delineated time frames so that we can see where we stand as of a point in time If you just print out the data as it flows through your statement You don't have that that defined delineation. It's gonna be difficult to reconcile So you want to actually the bank statements are useful for the bank reconciliation process So you're gonna get something like this. There's just a mock bank reconciliation and and then so that we can so that we can compare it So obviously we're gonna get the bank reconciliation for January in some time in February And then we can use that to compare to to the January data and reconcile the system and then in February we'll get the bank statement sometime in March now in some cases a lot of times Businesses get behind in terms of when they do the reconciliations and they might do multiple Reconciliations at you know at a time so now I didn't do one for January I've got to do February and that's what we're gonna do in our practice problem here