What to Do When Your Business Bookkeeping Is Months Behind

It happens more easily than many business owners expect.

You're busy serving clients, managing employees, generating sales, and running the business. Bookkeeping gets pushed to next week. Then next month.

Eventually, you realize the books haven't been properly updated or reconciled in months.

The good news is that falling behind doesn't mean you need to start over. But simply importing months of transactions into QuickBooks isn't necessarily enough to get the books back into shape.

Start With the Last Reliable Month

Before trying to fix the current numbers, determine when the books were last complete and accurate.

When were the bank and credit card accounts last reconciled? Were the balances correct at that point?

That gives you a reliable starting point.

If you're not sure when the books were last accurate, more investigation may be necessary before moving forward.

Gather the Financial Records

You'll generally need statements for each account that needs to be brought current.

That may include:

• Business checking and savings accounts
• Business credit cards
• Loans and lines of credit
• Payment processor reports
• Accounts receivable information
• Accounts payable information

The exact records depend on how the business operates.

Don't Assume the Bank Feed Contains Everything

Bank feeds are useful, but they aren't a substitute for reconciliation.

Connections can be interrupted. Transactions can be duplicated, excluded, or incorrectly matched. Older transactions may no longer be available through the feed.

That's why catch-up bookkeeping should be based on actual financial records, not simply whatever currently appears in the QuickBooks banking screen.

Work Forward One Month at a Time

Trying to fix six or twelve months simultaneously can make an already messy situation harder to understand.

A better approach is generally to work chronologically.

Review the transactions for one month, reconcile the relevant accounts, resolve discrepancies, and then move to the next month.

That makes it easier to identify where a problem began.

Look for Problems That Have Accumulated

Books that haven't been maintained regularly often contain more than uncategorized transactions.

You may find duplicate transactions, old unreconciled items, incorrect transfers, personal transactions mixed with business activity, customer payments recorded incorrectly, loan payments categorized entirely as expenses, payment processor deposits recorded incorrectly, or old accounts receivable or accounts payable balances.

Those issues can affect the financial statements even after the bank accounts appear to reconcile.

Review the Financial Statements When You're Finished

Once the catch-up work is complete, review the Profit & Loss Statement and Balance Sheet.

Do the numbers make sense?

Are there unusual negative balances? Old receivables? Suspense or uncategorized accounts? Loan balances that don't look reasonable?

Reconciliation is essential, but it isn't the only test of whether the books are reliable.

Catching Up Is Only Half the Solution

Once your books are current, the next goal is keeping them that way.

A consistent monthly bookkeeping process prevents another six-month cleanup and gives you financial information you can actually use throughout the year.

Blue Walney Bookkeeping & Advisory provides catch-up and cleanup bookkeeping as well as ongoing monthly bookkeeping for small businesses and professional services firms.