Bookkeeping Clean Up Checklist: A 5-Step Process

bookkeeping clean up checklist

One option is to use an app like TripData to capture how far you’ve traveled. If you’re not already using an online, cloud-based accounting system , you should consider it for next year. A cloud-based accounting system can be helpful when it comes to syncing tasks, sourcing information, completing forms quickly, and double-checking to make sure everything is in order. As a small business owner, you can view the balance sheet report as a financial snapshot of your business. Towards the bottom of the report, take note of the section labelled “Retained Earnings.” This line item tracks your company’s net worth over several years. Small business owners need to have cash flow goals, but they have to be achievable.

  1. Too often, clients seek help with their books after years of doing their accounting in a shoebox.
  2. Some items can be handled internally; others require a certified public accountant (CPA) or tax professional.
  3. Beyond that, you might not get much practical value from the exercise, and it’s unlikely that anyone else will ask you to go back any farther.
  4. We recommend using a cloud-based accounting software to safely store your financial documents.
  5. Before we dive into the steps to catch up, it’s important to emphasize the importance of staying organized in your bookkeeping.

The open vendor deposit reports show which orders are yet to be filled. Although it seems pretty obvious, this task is often overlooked, which can cause unnecessary complications or emergencies if there is no available cash to spend. You want to review how much cash you need on a month-to-month basis and make at least that much available. If you have any cash-intensive plans in the coming month, you should make allowances for that as well.

Assess the effectiveness of your systems and identify areas for improvement. By cleaning up your bookkeeping, you gain control over your financial records, minimize the risk of errors, and improve the overall efficiency of your business operations. It allows you to have a clear picture of your financial position and make informed decisions to drive growth and profitability. The routine bookkeeping procedure consists of several processes, and in order to have a clean book, you must adhere to them each month. You can find these types of errors by double-checking your work and preparing trial balances at the end of each reporting period. Download our free PDF guide to learn how to avoid 10 common accounting errors.

Free Bookkeeping Clean Up Checklist

When you have accurate and up-to-date records, you can easily see where your money is going and identify areas where you can cut costs or invest more. This can help you make informed decisions that will benefit your business in the long run. Once you’ve done the bedrock work of reconciling your cash accounts, you can move on to other issues affecting your books. None will be as important as verifying your cash flow against source documents, but each of them contributes to an accurate picture of your business and its true value. By creating a system for ongoing bookkeeping maintenance, you’re setting yourself up for long-term success.

If your receipts, invoices, and other financial documents are scattered and disorganized, it can be difficult to keep track of everything. Consider implementing a system for organizing your documents, such as using folders or a digital filing system. If you literally keep your records in a shoebox, you probably know that there’s some room for improvement.

You can evaluate your accounts receivable and payable, payroll, inventory, and tax filings, clean up your chart of accounts, and back up your data by following these procedures. The next step in your bookkeeping cleanup checklist is to reconcile your bank statements. Take a look at your bank statements over the course of the timeframe you are working on. The next step will be to check your receivables to ensure that all overdue bills have been accurately recorded. The sum of money owed to your company by clients who still need to pay their invoices is called accounts receivable. Reconciling your accounts is the process of comparing what you record in your accounting books with the transaction on your bank or credit card statement.

bookkeeping clean up checklist

Be sure to record any interest paid on lines of credit as an expense, and keep an eye out for especially unusual activity, such as negative balances. As with your cash accounts, plan to reconcile each credit account once a month going forward. If your books have been in disarray for years upon years, you might be tempted to draw the line and stop the reconstruction process. It’s vital that you clean up the last three years of records, and best if you go back seven years. Beyond that, you might not get much practical value from the exercise, and it’s unlikely that anyone else will ask you to go back any farther.

Key Monthly Bookkeeping Tasks to Include in Your Checklist

It will help you stay organized, minimize future clean-up efforts, and ensure accurate financial reporting. Compare each transaction on your bank statement with the corresponding entry in your bookkeeping records. Look for any discrepancies, such as missing, duplicate, or incorrectly recorded transactions. Adjusting entries are key for making sure you record transactions in the right accounting period.

This step may not apply to all businesses, but it’s a common enough issue. Many small businesses begin as side projects; many barely record sales or revenue at first. Most fledgling businesses keep records of when they receive cash from sales or spend cash to cover bills, and leave it at that. If your business still handles its books this way, you should strongly consider moving to the accrual method of accounting, and this is the perfect time to do so. The accrual basis records transactions not when cash is exchanged but at the moment it is committed, through invoicing, purchase contracts, or other agreements.

It’s wiser, though, to take a breath at this point and ensure that your books suffer no further damage. The key to this step is making sure that all incoming documents are handled by a reliable accounting system under the eye of a reliable bookkeeper. Too often, small business owners continue to manage the books themselves, even after the business has grown and its accounting needs have changed.

Step 5: Check for Errors and Inconsistencies

If you’ve been keeping the books yourself or with in-house personnel, it’s time to get some extra training for the person who’ll be managing things from here on out. For now, you may well need to take control of the process yourself, at least for a little while. For most small businesses, a simple accounting software package is all you’ll need to get things back on track. If that means investing in new software, choose a program that allows you to create retrospective ledger entries (more on that in step 5). No bookkeeping cleanup checklist will ever be enough if you do not stop the systematic errors that got your books to this point. After categorizing all transactions, it’s time to reconcile all accounts, including bank and credit card accounts.

Finally, it’s time to create a plan to stay on top of your bookkeeping going forward. By creating a system that works for your business, you’ll be able to maintain the accuracy of your financial records and avoid falling behind again. Another important aspect to consider when checking for errors and inconsistencies is to ensure that all transactions are properly recorded. This means that all income and expenses should be accurately recorded in the correct accounts. Any missing or incorrect entries can lead to inaccurate financial statements and tax filings. Before we dive into the steps to catch up, it’s important to emphasize the importance of staying organized in your bookkeeping.

Signs Your Business Needs Catch Up Bookkeeping An Entrepreneur’s Guide To Bookkeeping, Tax, & How They Interact

Start by collecting all your receipts, invoices, bank statements, and other financial documents. Sort them chronologically or by category, depending on your preference. So, let’s dive into the step-by-step bookkeeping clean up checklist and get your small business finances back on track.

Consider your business needs and budget carefully before making a decision. Another benefit of automating your bookkeeping is that it can help you stay organized. With automated systems, you can easily track your expenses and income, categorize transactions, and generate reports. This can be especially helpful during tax season, as you’ll have all the necessary information in one place and won’t have to spend hours sorting through receipts and invoices. By staying organized, you’ll also be better equipped to identify areas where you can cut costs and improve your bottom line.

As you progress through the bookkeeping clean-up process, it’s important to update and categorize your transactions accurately. This step ensures that your financial records reflect the correct information and allows for easier tracking and analysis. Whether you’re a solopreneur or have a small team, our guide is designed to simplify the bookkeeping clean up checklist process and set you up for success. At Zeni, we require an initial bookkeeping cleanup for every client to check for common signs of incomplete books and misaligned data. The best way to manage this regularly is to do a monthly reconciliation to identify any mismatched or missing transactions. So once you catch up on your books, continue to reconcile your bank statements each month.

Leave a Reply

Your email address will not be published. Required fields are marked *