7 steps to clean up your books

At My Books and Taxes we love setting you up for success and that is why we are very passionate about CleanUps. Having clean, accurate, and organized books is a tool that will allow you to understand your finances and grow.

You may ask, why cleanups? Because it is challenging! It requires knowledge, skills, and care. We consider this an opportunity to show you all of that and deliver you a set of books that will be the envy of your competition.

We created a Clean Up Workflow that allows us to consider every aspect of your organization and make sure we are not skipping anything to get that final product that we can feel proud of.

We want to share with you our 7 most important steps to clean up your books:

1. Thorough Review

The first thing you should consider and maybe the hardest part is to analyze where the problems are located in your particular case. Once it becomes evident that a problem exists, knowing where to look to find the root cause is often the hardest aspect for business owners.

2. Modify Chart of Account to adjust it to your industry’s needs

If you already have a Chart of Accounts, you need to analyze if it covers everything you need in your Financial Statements. If this is not the case, you should revise/edit it for something more specific. QBO offers a pretty basic Chart of Account.

3. Accept all bank transactions and reconcile all bank accounts and credit cards

Accept all transactions in the Bank Feed and classify those in the corresponding account depending on the type of expense. Reconcile all bank accounts and credit cards to determine if there are missing transactions. If yes, you need to record these transactions to be able to reconcile all accounts correctly.

If you find any duplicate transactions, you must determine whether you are taking into account the correct transaction and discard/delete the other one (Be mindful of the effect that can have on A/R and Undeposited Funds).

Keep in mind that only business accounts should be connected to your bank feed. If personal banks are connected you should disconnect them and enter any business transactions in those accounts manually.

4. Review Undeposited Funds

You need to check the Undeposited Funds to make sure there are no old “Received Payments” waiting to be deposited that have been already deposited.

5. If you are using 3rd party apps, check sales and fees

Make sure all sales were registered correctly, including the merchant’s fees.

6. ​​If you have payroll, match payroll reports to payroll expense accounts and payroll liabilities

You must make sure that the information in the 941 and W2 forms is the same information that you have in your books. If not, you need to review where the discrepancy is to make the adjustment necessary.

7. Review the Accounts Receivable

Make sure all open invoices are indeed awaiting for payment. If you encounter a paid invoice showing still open, look for the amount paid in your bank and reclassify as A/R including the Client and then mark the invoice as paid.

These are just a few steps to mention, however, the cleanup can be more complex and extensive, therefore, there are more to take into consideration.

If you find yourself in a blind alley, please do not hesitate to schedule a Discovery Call or contact us at [email protected].