A busy season runs long. You switch accounting software and it doesn’t go smoothly. The person who was handling it leaves. However it happened, it’s been months now, and the longer it sits the bigger it feels.
It’s still doable. What follows is the order we work in when we bring a set of books up to date, and it’s the same order that works if you’re doing it yourself. Each step makes the next one easier.
Start with your last filed tax return
Before catching up on your bookkeeping, it’s important to establish a reliable starting point. We typically begin by reviewing your last filed business tax return and comparing it with your QuickBooks records to identify any discrepancies.
From there, we determine which periods need attention and gather the bank statements, credit card statements, and other financial records needed to bring your books up to date. Starting with accurate balances helps avoid carrying old errors into the current year.
Determine where the catch-up work needs to begin
Once you’ve reviewed the last filed tax return and your accounting records, identify the earliest period that needs attention. This may involve reviewing prior reconciliations, correcting beginning balances, or addressing transactions that were never recorded.
From there, work forward chronologically, reconciling each month before moving to the next. This helps ensure that errors are identified and corrected rather than carried forward.
Categorize in batches
Going transaction by transaction is what makes this feel endless, so group similar ones and review each group before you categorize it.
Transactions from the same supplier may belong in different categories depending on what was purchased. Review transactions before applying the same category to multiple purchases, and make sure transfers between accounts are recorded correctly.
In QuickBooks Online, you can create bank rules to help categorize recurring transactions. These rules should be reviewed periodically to ensure transactions are being categorized correctly.
Reconcile each month before you move on
This is the step that gets skipped. Skipping it is how you end up with books that look finished but don’t actually tie out.
Reconciling means checking the month in your books against the statement the bank sent and confirming they agree. If they don’t, something is missing, duplicated, or recorded for the wrong amount. It’s far easier to find that inside one month than to go hunting across a year.
Do it at the end of every month before you start the next one. A month that won’t reconcile is telling you something, and it’s better to hear it now.
Make a list of what you can’t identify, rather than guessing
Every catch-up turns up transactions nobody recognizes. A charge from a vendor with an unfamiliar trading name, a deposit with no obvious source, a payment that could be two different things.
Put those on a list instead of assigning them a best guess. A wrong category is harder to find later than a blank one, because nothing about it looks wrong. Working through a short list at the end, with your card statements and your email in front of you, usually clears most of it quickly.
Anything still unexplained after that is worth asking your tax preparer about before the books are finalized.
When catching up on bookkeeping is bigger than a few evenings
Some catch-ups are a weekend. Others are a project. A few signs you’re in the second group:
- You’re more than a year behind, or across more than one tax year
- The QuickBooks file itself has problems, like duplicated accounts or balances that have never been right
- The accounts have been reconciled before but incorrectly, so the starting numbers can’t be trusted
- There’s been a payroll provider, a merchant processor, or a loan in the period, and none of it has been recorded
- You’ve tried twice and stopped twice
None of that means it can’t be done. It means it’s a project with a scope rather than an evening with a laptop.
Where to go from here
If you want to work through it yourself, the order above is the whole method. Start with your last filed tax return, determine where the catch-up work needs to begin, categorize transactions, reconcile as you go, and keep a list of anything you can’t identify.
If you’d rather hand it over, that’s catch-up bookkeeping, and we’re happy to take a look at where things stand. If you’re not yet using QuickBooks Online, we can help you get set up. If your existing books need corrections or your Chart of Accounts needs to be reorganized, that falls under bookkeeping cleanup.
Ledger & Logic provides bookkeeping services and does not prepare or file income tax returns.