Bookkeeping Cleanup Checklist

It happens more than you think. 

Accounting gets left behind while business moves forward. 

Before you know it, it’s been months or even (yikes) years, since your bookkeeping has been properly updated. And now the project looms over you like an ominous thunderstorm waiting to strike with disastrous results.

Getting ready to do bookkeeping cleanup sounds intimidating, but can be done effectively by systematically working through these steps to gather the information you need. Once you’ve cleaned your bookkeeping, your business will be better prepared for growth, tax season, and investment opportunities. 

Take a look at this bookkeeping cleanup checklist to get all your financial ducks in a row. 

1. Collect all your financial records 

It’s hard to say which part of this process is the most difficult, but depending on the type of business you have, rounding up all your past financial records may be the most time-consuming. You are looking to gather all of your bank statements, receipts, invoice, and other related financial information. 

Start by going through your email. This is a great natural storage system for managing your electronic purchases. You can sort everything by date or keyword to help you in your search. Download, print, or screenshot all receipts and file them physically or electronically somewhere like Google Drive. 

Next, contact any vendors or clients you have done business with over the past year. If you don’t have a record of your transactions, they might. They can provide you with a printout list of each transaction or invoice between you. 

Now take a look at your bank and credit card statements. Make a note of any transactions that you don’t have a record of and prepare to track down that information if needed. If you use a third-party payment processor, review all of your transactions there as well. 

Open up your accounting software and assess what might be missing from there. Are your bank feeds connected? What transactions are missing? What records need to be brought up to date? 

Finally, if you have any physical records, go through them and organize them. They may help you find any missing information from all of your electronic transactions. 

What to do if you can’t find the records of a purchase or invoice? 

If you can’t find records of a transaction that you know occurred or you are missing an invoice, you can try the following: contact your vendor or supplier, recreate the invoice based on the information/records that you do have, or use estimates based on historical information. 

Now that you have all the pieces to the puzzle, you can move on to the next step of the bookkeeping clean-up checklist: categorization. 

2. Categorize transactions

When it comes time to categorize your transactions, you want to remain consistent. Your chart of accounts is a list of the types of categories or accounts that you use to classify each transaction. As a small business, you want to avoid having too many accounts. A good recommendation is to have no more than 10-15. Oftentimes your bookkeeping software will provide you with a great starting point for your chart of accounts. 

Categorize similar transactions into the same account, but still be as clear as possible about what the purpose of each transaction is. For example, instead of labeling something as “supplies” you may want to be more specific, like “production supplies” or “marketing supplies.”

This step is crucial to getting accurate information for your financial reports. This also greatly impacts your taxes. Review past transactions to check that they were categorized correctly, as well as update those that have not yet been categorized. 

Depending on your bookkeeping software, you may be able to automatically categorize transactions as they occur, which helps keep your bookkeeping updated. 


freelancer working at a laptop

3. Reconcile bank statements

The next step in your bookkeeping cleanup checklist is to reconcile your bank statements. Take a look at your bank statements over the course of the timeframe you are working on. Is each transaction reflected in your accounting software? Make a note of any discrepancies, like a missing check or deposit. 

You may have to manually add transactions that are not in your accounting software to ensure that you can successfully reconcile your bank statement. When you are completed, the balance in your bank account should be the same as the balance on your accounting system. 

The best way to manage this regularly is to do a monthly reconciliation to identify any mismatched or missing transactions. So once you catch up on your books, continue to reconcile your bank statements each month. 

4. Adjust entries

Next up on the bookkeeping cleanup checklist: adjusting entries. There may be circumstances where you need to manually adjust entries to account for accruals, depreciation, or amortization. (Now is a great time to call in the professionals!) 

Adjusting entries are accounting entries made at the end of an accounting period to update account balances and ensure that financial statements are accurate. Adjusting entries are necessary because some transactions may not have been recorded in the period in which they occurred or may have been recorded incorrectly.

Here are some common instances where your small business may need to adjust entries:

  • Accruals: Accruals are expenses that have been incurred, but have not yet been paid or recorded. Examples would include: wages or salaries owed to employees at the end of the period, interest on loans, or rent owed on a lease.
  • Depreciation: Adjusting entries of depreciation is necessary to ensure that the asset’s value is accurately recorded on the balance sheet. This could include computers, printers, vehicles, furniture, or machinery, just to name a few. 
  • Amortization: Similar to depreciation, amortization is used to allocate the cost of intangible assets over their useful life. This could include patents, copyrights, and trademarks. 
  • Prepayment: These are expenses that have been paid in advance, but have not yet been incurred. This could include paying for insurance coverage for the entire year in advance. 
  • Accrued revenue: This is revenue that has been earned, but not yet received. For example, if you perform services for a client during one accounting period, but don’t receive payment until the next period. Adjusting entries may be necessary to reflect the earned revenue in the current accounting period. 

Adjusting entries can be a little more technical than what most small business owners should be expected to do. This is a good place in your bookkeeping cleanup to solicit the help of a professional to ensure that you are following generally accepted accounting principles (GAAP) and adjusting entries properly. 

5. File your taxes

As you make your way through your bookkeeping cleanup checklist, you want to ensure that you are up-to-date with paying your taxes. Whether you filed an extension or it’s time to start paying regularly quarterly taxes, your newly organized bookkeeping will help you pay on time and consistently. Paying your taxes quarterly can help you avoid unnecessary fees or sticker shock when your annual taxes come due. You can self-pay on the IRS website or talk with your accountant about how to determine the amount of taxes you should be paying quarterly. 

6. Find a new system

If you are diving deep into a bookkeeping cleanup that is 12+ months overdue, it’s time to get some new systems in place so you don’t end up in the same situation next year. Each business has different needs, but you should look for help with the areas you struggle the most. Find an accounting software or tool that allows you to:

  • Automatically connect payment processors and bank feeds
  • Send invoices and collect payments
  • Electronically store receipts
  • Run basic financial reports like your balance sheet, income statement, and cash flow statements to help you understand the financial health of your business.

Your greatest tool will be consistency. So mark a day on your calendar, set an alarm, or get an accounting accountability buddy and regularly sit down with your finances. You can use this bookkeeping cleanup checklist to help you stay on track. The good news is the more consistently you do this, the less time it will take. If your greatest discovery during this process is that you don’t have the time, energy, or knowledge to do this on your own, it’s time to outsource your bookkeeping.

a bookkeeping cleanup checklist to help small businesses get their books up to date


Get Caught Up Now

A few mistakes on your bookkeeping can seem like no big deal, but when the errors compound it can quickly snowball out of control. Our team of professional bookkeepers can clean up your books and help you keep your bookkeeping look neat and tidy while you continue to run your business. Enjoy accounting support specifically tailored to your business needs.

Reach out to us for a free bookkeeping consultation.

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