10 Crucial Bookkeeping Clean-Up Checklist Items You Should Review

Disorganization breeds dysfunction and delays. You've got an important meeting in fifteen minutes, so you open your cloud-based drive to look over your presentation quickly. But it's not there. Panic sets in as you frantically try to remember what you titled it or which folder you may have saved it in.

Disorganization in your company's accounting and bookkeeping can have disastrous consequences, actively encouraging expensive dysfunction and likely causing costly delays. If you hope to help your startup avoid disorganization, dysfunction, and delays, keep reading to discover our essential bookkeeping cleanup checklist outlined below.

The Benefits Of A Clean And Organized Bookkeeping System

A clean, orderly, up-to-date bookkeeping system ensures you have access to accurate financial data when you need it. The better organized the accounting system is, the more efficient it will be, allowing your business to better allocate funds, catch discrepancies, and guard against various forms of fraud. Moreover, a well-organized bookkeeping process gives you clarity on the business's financial health and stability.

Essential Bookkeeping Clean-Up Checklist Items

Whether your business is well-established or in the early phases of pre-seeding, keeping detailed, organized financial records is essential for the financial health of the organization. This is especially the case for startups. Even the best, tightest-run bookkeeping services need to run routine clean-up check-ins from time to time to make sure nothing falls through the proverbial cracks. Don't think of bookkeeping checklists as the response to a problem but as the planned maintenance, every bookkeeping system requires.

1. Reconcile Your Bank Statements

Start by reconciling your financial statements with the bank. Compare your company's ending balance on the internal cash flow statement with the ending balance from the bank for the same period. If the numbers are the same, great, your job is done. Chances are the final balances will vary. As you complete the reconciliation process, you'll track down unpaid invoices from accounts receivable, look for errors on your income statement, and find other sources of the discrepancies to help create more accurate finances.  

2. Categorize Your Transactions

As you undertake the cleanup project, reassess your transaction categories to ensure they're still accurate and applicable. Good spending categories should be consistent, coherent, and specific without being overly cumbersome. For instance, it might seem simple to dump marketing and office supplies into the same "supply" category, but you'll gain greater insight if you split it into "marketing supplies" and "office supplies."

For small business bookkeeping, categorization is a bit of an art because you've got to balance making specific categories against creating too many categories so that they become difficult to deal with. Accounting software is particularly helpful for business owners hoping to improve categorization because it provides several pre-set categories to choose from.

3. Review Unaccounted-For Income And Expenses  

As you complete the cleanup project, be sure to account for the unexpected. Investigate any strange transactions on either side of the balance sheet. Unexpected income could be the result of a data-entry error or a glitch in the client's accounts payable department. Whatever the cause, it's best to find it early.

Reviewing unaccounted-for expenses is equally important, not only to ensure accurate accounting records but also to provide an extra layer of security against fraud or embezzlement. In summary, if you see something in the books that doesn't line up, it's part of the bookkeeper's duties to investigate until the discrepancies are resolved.

4. Clear Up Outstanding Accounts

Even in the best systems of bookkeeping for a small business, accounts get overlooked. That's the simple reality. While you're performing this bookkeeping cleanup checklist, be sure to note any outstanding accounts for which your company has issued an invoice but has not yet received payment. Likewise, be on the lookout for any invoices your business still needs to pay.

As you resolve these accounts, consider why these accounts were missed in the first place. Were they uncategorized? Is this client known for late payment? Did the vendor send the invoice? Did you fail to account for it? As you ask these questions, you're not only chasing down a mystery, but you're learning about holes in your accounting process, too.

5. Fix Errors In Your Cart Of Accounts

As you fix errors in your income statements or balance sheets, be sure to fix the errors in the larger chart of accounts as well. The chart of accounts is a master list of accounts used by a business so the company can work with financial data that's in a consistent, organized, and logical form. Even the smallest discrepancy in statements or sheets at the beginning of the accounting process can corrupt data further down the line. If you use accounting software or an online bookkeeping platform, this step may be automated, taking the pressure off you through machine learning. If you still use traditional accounting methods, be sure to manually correct the data before moving on.

6. Review Inventory (If Applicable)

Not every business model requires the company to deal with large stocks of inventory, but for those in the world of manufacturing, healthcare, and retail, reviewing inventory is vital. Depending on the nature of your business, an inventory inconsistency could mean your night manager ordered too many snack cakes, so now you need to run a sale. It could also mean the clinic procurement department doesn't have as many boxes of gloves as expected, so now management must pivot to avoid an interruption to everyday operations. If your company deals with any sort of inventoried item, the inventory needs to be accurate and up to date.

7. Back Up Your Data Securely

An often neglected part of the bookkeepers' duties involves making sure all your financial data has a functioning backup system. Many online bookkeeping platforms and account software systems simplify this process by automatically saving backups of your data securely to the cloud. If you choose to manage your own data backup system, be sure the data you hold is secure for the benefit of the company and your customers, clients, and partners. Depending on your industry, you may face additional security requirements based on federal regulations. This is the case for healthcare providers who are required to encrypt health data in compliance with HIPAA.

8. Automate What You Can

Trying to focus on the day-to-day of your small business and accounting for financial accuracy requires constantly shifting your attention in different ways. Automation can help streamline the accounting process, freeing up you or your accounting department to perform higher-level thinking and assessments. Plus, even the best bookkeepers will inadvertently enter errors as they perform manual data entry.

Automation leverages machine learning to provide more accurate data. How? Humans get tired, our eyes get blurry, and we make mistakes. Computer systems don't feel the same fatigue or suffer the same setbacks, so the data they derive is more trustworthy.

9. Schedule Regular Bookkeeping Tasks

Scheduling routine bookkeeping activities can help you formalize the accounting process, undertake timely audits, and catch small problems before they spiral out of control. As you begin to schedule regular times to perform bookkeeping duties, start by listing the tasks you have to do weekly, biweekly, monthly, quarterly, and annually. Formalizing the accounting process helps enshrine it in the company's operations.

Scheduling routine audits is a bookkeeping best practice because when you get busy, looking for problems where there don't appear to be any can feel pointless. Even so, by conducting routine, scheduled audits of your accounting system, you can find and fix issues of fraud or missed payments before they grow into giant problems.

10. Consider Outsourcing

Depending on the size of your company, you may want to consider bringing in consultants or outsourcing the cleanup to trained professionals. Some AI-driven accounting platforms and online bookkeeping services use automation to perform a quick clean-up when they take on a new client.

There are a few advantages to outsourcing the clean-up. First, you're working with experts in the field who can offer you solid advice. Second, while these platforms aren't free, you may even save money considering the costs associated with employee training. Finally, outsourcing frees you up to focus on the mission and vision of the business. Chances are you didn't find seed for a startup just to spend most of your time reconciling balance sheets, so hiring a professional service can get both you and your finances where they should be.

Maintain Your Bookkeeping Health

Remember, disorganization breeds dysfunction and delays, but superior organization in your accounting process can help your business function more smoothly at a quicker pace. As you walk these ten steps from our bookkeeping cleanup checklist, you'll reconcile accounts, find inconsistencies, and regularly review relevant data in order to make sure your accounting process produces accurate finances.

As you go beyond the bookkeeping basics, it may be worthwhile to reach out to someone who understands automation in accounting a little better. Finding the right advanced accounting software and working with an expert financial support team makes the cleanup process significantly easier than if you tried to do it on your own.