How do I know if my books are behind or need cleanup?
The clearest sign is that you can’t answer basic questions about your business finances. If someone asked how much profit you made last month and you couldn’t give a confident answer, that’s a problem. Accurate books should give you that number in about 30 seconds.
Check when your bank accounts were last reconciled. Open your accounting software and look at the reconciliation history for each account. If the last reconciliation was more than 60 days ago, you’re behind. If you’ve never reconciled or don’t know what that means, your books almost certainly need work.
Look for uncategorized transactions. QuickBooks and similar software flag transactions that haven’t been assigned to an expense or income category. A handful is normal if you’re staying current. Dozens or hundreds of them means weeks or months of bookkeeping work have piled up.
Compare your bank balance right now to what your accounting software shows. These numbers should match as of the last reconciliation date. If they’re off by more than a few dollars and you don’t know why, there are errors hiding in your records.
Other warning signs include invoices sitting in accounts receivable that were actually paid months ago, duplicate transactions appearing throughout your records, personal and business expenses mixed together without clear separation, and your accountant complaining every tax season about the state of your files.
The longer messy books sit, the harder cleanup becomes. Bookkeeping cleanup for a few months of neglect is manageable. A few years of accumulated problems takes significantly more time and costs more to fix.
If you recognize several of these signs in your own situation, address it before tax season forces the issue. A Detroit bookkeeping service can assess the current state of your records and tell you exactly what needs to happen to get them accurate again. From there, staying current is much easier than constantly playing catch-up.
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