A business may need bookkeeping cleanup when its accounting records are incomplete, inaccurate, or no longer agree with the actual bank, credit card, loan, and payroll records.

Common signs that cleanup is needed include:

  • Bank or credit card accounts have not been reconciled
  • QuickBooks shows negative bank or credit card balances that do not make sense
  • Transactions remain uncategorized for several months
  • Income or expenses appear to have been entered more than once
  • Loan balances do not agree with lender statements
  • Personal and business transactions are mixed together
  • Old customer invoices or vendor bills remain open even though they were paid
  • Payroll liabilities remain on the balance sheet after the taxes were paid
  • Owner contributions, distributions, and payroll were recorded incorrectly
  • The prior year tax return does not agree with the QuickBooks balance sheet

Cleanup should generally be completed before preparing a business tax return or beginning monthly bookkeeping. Filing a return from unreliable books can result in inaccurate income, missed deductions, incorrect shareholder information, and additional professional fees.