Messy books do not hurt right away. They hurt in April, when you apply for a loan, or when the IRS sends a letter. If any of these sound familiar, it is time for a cleanup.
1. Your bank balance and your books do not match
If nobody reconciles your accounts every month, your reports are guesses. Reconciliation is the first thing we fix.
2. Personal and business expenses are mixed
Groceries on the business card or business supplies on your personal card make it hard to prove deductions and can weaken the protection of your LLC.
3. You have a big "uncategorized" or "ask my accountant" balance
Every transaction should have a home. A large uncategorized amount means your profit and your taxes are probably wrong.
4. You do not know if you made money last month
If you cannot answer that question in a minute, your books are not working for you.
5. Your tax preparer had to rebuild your year
When taxes take weeks because your records are incomplete, you pay more and you risk missing deductions.
6. You are behind on payroll, sales tax or 1099s
Late filings bring penalties that add up fast. Clean books make these deadlines easy.
7. You want a loan or to sell your business
Banks and buyers ask for accurate financial statements. Clean books can be the difference between yes and no.
What a cleanup includes
- Reconciling every bank and credit card account
- Categorizing every transaction correctly
- Separating personal items and recording owner contributions and draws
- Fixing duplicates and errors in QuickBooks
- Accurate profit and loss and balance sheet reports