Steve was in a fix. After trying hard to establish his own online footwear business for 10 years, he had now given up and decided to sell it off. But that wasn’t easy either, because Steve had no idea what the true valuation of his business was or at what price he should sell it. What Steve hadn’t figured out was that his problem stemmed from his consistent lack of attention to maintaining his books of account over the years. Often, it is a problem for many startups or small businesses – they do not realize that keeping their books of account streamlined and up-to-date isn’t just a good business habit but a real value driver.
Is Accounting Software the Solution to Bookkeeping Gaps?
Bookkeeping may sound like a simple job, but recording, classifying, and reporting every single business transaction, compiling financial reports, and preparing your business accounts for tax filing is painstaking and time-consuming. An error in even a single digit can translate into a big impact on your business. Many businesses are addressing this problem with accounting software that automates routine tasks and uses Optical Character Recognition (OCR) to reduce mistakes in recording numbers.
But while these tools and software are much faster and cost-effective, they aren’t foolproof. Erroneous integrations with your payment processors or payroll providers can sometimes lead to duplication or omission of transactions. Hence, even if you have the best accounting software installed, regular reviewing of your books of accounts is necessary. One solution to keep your books of accounts from becoming completely messy is to engage professional bookkeeping cleanup services.
What is Bookkeeping Cleanup?
From catching up on months of recordkeeping backlogs to correcting incorrect financial entries, professional bookkeeping cleanup services specialize in organizing your books accurately and in compliance, so that your business decisions and growth do not suffer. These services also offer ongoing bookkeeping support to help you maintain the corrected books over the long term.
Step-By-Step Guide to Bookkeeping Cleanup
Bookkeeping cleanup is a long process that could take weeks to complete, depending on how complicated (and messy) your books of accounts are.
Gathering Documents and Assessing Scope
The first step to streamline or rectify anything is to collect all your financial information, including statements, credit card statements, vendor invoices, expense records, payroll details, and more. The professional bookkeeping cleanup service providers then organize these documents and assess them to gauge the volume of work. Depending on how many transactions are missing or incorrect, they provide an estimate of how long the cleanup process will take and what additional details will be required from your end.
Completing the Transaction Backlog
Having arranged all the documents in order, they will then begin recording all missed transactions, expenses, and other details systematically into your accounting system. They can also recommend useful accounting software or applications that can be customized to your needs for increased efficiency. Using a checklist to ensure no backlog goes unnoticed is also a great way to keep your bookkeeping on course.
Bank Reconciliation
With all transactions now duly entered, the professional bookkeepers proceed to reconcile your books of accounts with business bank accounts. All ledger balances are matched against the bank statements and credit card statements, line by line, to identify any duplicate or missing entries. Inventory records are also checked for discrepancies, and accounts receivable aging reports are generated to review unpaid customer invoices and forecast potential bad debts.
Correct Errors and Implement Controls
With all kinds of discrepancies now identified, the bookkeeper can rectify any mistakes in your books of accounts and reclassify or adjust misposted data entries. They recheck all depreciation, accrual, tax, and other calculations, and correct the figures accordingly. They also assess and update vendor payments and clean up any duplication in the system. By correcting all financial errors, they empower you to take well-informed, data-backed decisions for your business.
Deliver Accurate Reports and Documentation
With all your financial data cleaned up and updated, the bookkeeper can provide accurate, detailed books to prepare income statements, cash flow statements, balance sheets, and other relevant financial documents. Based on these documents, you can now file your taxes confidently.
Post-Cleanup Support
To ensure your business finances stay organized and don’t fall back into disarray, you can schedule regular maintenance reviews for the long term. Most cleanup services also offer integrated tax services as an add-on service to ensure ongoing compliance.
When Does Your Business Need Bookkeeping Cleanup?
If your small business is facing serious issues with:
- Identifying and adding missed financial records.
- Meeting tax deadlines and ensuring compliance
- Arranging audits and due diligence for a detailed financial review
- Compiling validated financial reports for fundraising from potential investors
- Transitioning to a new accounting platform
- Clean financial handover due to a change in ownership through a merger, acquisition, or new partnership
Then, a bookkeeping cleanup is your best solution.
What Can Bookkeeping Cleanup Services Do for Your Business?
A bookkeeping cleanup is more than just a streamlining process. Sometimes, such cleanups can uncover hidden capital, resources, and potential, just when you thought there was no hope. Had Steve scheduled such a cleanup for his online footwear business, he might have found that his financial crunch was nothing but a case of missing transactions or miscalculated figures. Not only would that have given his cash flow and operational efficiency a helping hand, but it could have also saved his business from failure.
A bookkeeping cleanup can go a long way in protecting your business from potential ruin. Doing it regularly can help unlock more value and potential for your small business.
Contact Black and Gill LLP in West Toronto to Help You with Accounting and Bookkeeping Needs
At Black and Gill LLP, our accountants and bookkeepers can provide services such as preparing books from scratch, setting up bookkeeping software, and cleaning past records. To learn more about how Black and Gill LLP can provide you with the best accounting and bookkeeping services, contact us online or call us at 416-477-7681.