7 Signs Your Business Books Need a Cleanup
Bookkeeping problems don’t always announce themselves with a giant red warning message. Sometimes the numbers look normal at first glance, but something feels off. Your bank balance doesn’t match QuickBooks. Your reports don’t make sense. You’re not quite sure whether you can trust the information in front of you.
Not sure what’s happening inside your QuickBooks file? Dunham Bookkeeping Services can review your books, identify the problems, and create a clear plan for getting them corrected.
Here are seven common signs that your business books may need a cleanup.
1. Your bank balance doesn’t match QuickBooks
The balance shown in QuickBooks won’t always match the current balance on your bank’s website because transactions may still be pending.
The reconciled balance should agree with your bank statement, though. A difference may point to missing transactions, duplicate entries, deleted reconciled items, or changes made after a reconciliation was completed.
Several unreconciled months usually make the problem harder to trace.
2. You have a pile of uncategorized transactions
A few uncategorized transactions during the month aren’t unusual. Dozens or hundreds that have been sitting there for months are a different story.
Uncategorized transactions can cause income and expenses to appear in the wrong places or disappear from meaningful reports altogether. They can also create a major headache during tax preparation.
Those transactions need to be reviewed and assigned to the correct accounts rather than moved into a generic category just to clear the list.
3. Old invoices still show as unpaid
Your Accounts Receivable report may show customers who paid long ago.
This can happen when payments get deposited without being connected to the original invoices. It can also result from duplicate invoices, incorrect payment dates, or income recorded more than once.
Old unpaid balances make it difficult to tell who truly owes you money. They may also overstate your income on accrual-basis reports.
4. Your income looks too high or too low
Income can be duplicated when a customer payment gets recorded once through an invoice and again through the bank feed.
Income may also be understated when deposits get categorized as transfers, owner contributions, loans, or another balance sheet account.
A sudden increase or decrease deserves a closer look, especially when it doesn’t match what you know happened in the business.
5. Loan balances don’t make sense
Loan payments usually include both principal and interest. Recording the entire payment as an expense leaves the loan balance unchanged and overstates expenses.
The opposite problem can happen too. Recording every payment against the loan balance leaves out deductible interest expense.
A bookkeeping cleanup can compare the accounting records to loan statements and correct the balance.
6. You have negative balances that shouldn’t be negative
Negative balances can be legitimate in certain accounts, but they often signal a problem.
A negative bank account may contain duplicate payments or missing deposits. A negative loan may mean too many payments were applied to principal. A negative Accounts Receivable balance may come from payments that weren’t connected to invoices.
The account name and underlying transactions provide the clues. The negative number itself is only the warning sign.
7. You avoid looking at your financial reports
This may be the biggest sign of all.
Your Profit and Loss and Balance Sheet should help you understand your business. They shouldn’t make you more confused.
Maybe you don’t know what the accounts mean. Maybe the numbers change every time you open the report. Maybe you already know something is wrong and would rather not dig into it.
Avoiding the reports doesn’t mean you’re bad at running a business. Most business owners didn’t start their companies because they dreamed of reconciling accounts and reviewing general ledgers.
It does mean the books need attention.
What happens during a bookkeeping cleanup?
Every cleanup is different, but the process may include:
• Reconciling bank and credit card accounts
• Reviewing uncategorized transactions
• Correcting duplicate or missing entries
• Fixing customer and vendor balances
• Reviewing loans and other balance sheet accounts
• Correcting the chart of accounts
• Comparing financial reports across months
• Creating a reliable starting point for ongoing bookkeeping
The goal isn’t simply to make QuickBooks look tidier. The goal is to produce financial records you can rely on.
You also don’t need to diagnose every problem before reaching out. Figuring out what happened is part of the cleanup process.
Ready to stop guessing about your numbers? Visit Dunham Bookkeeping Services to learn more about bookkeeping cleanup and ongoing monthly support.
