How do I know if my current bookkeeping is accurate?
The quickest test is comparing your bank balance in your accounting software to your actual bank statement. Log into your bank account and look at today’s balance. Then look at the same account in QuickBooks or whatever software you use. If those numbers match, your bank reconciliation is current. If they don’t, something hasn’t been recorded or reconciled properly.
Do the same check for credit cards. Pull up each credit card statement and compare the balance to what your books show. Credit card accounts should have a credit balance representing what you owe. If your books show a different amount than your statement, transactions are missing or duplicated somewhere.
Look at your balance sheet and ask whether the numbers make sense. Asset accounts should be positive. A negative balance in a bank account on your books when you know you have money is a red flag. Accounts payable should show a credit balance if you owe vendors. If it shows a debit balance, payments may have been entered without the original bills. Look at retained earnings and owner equity. If you don’t understand why those numbers are what they are, that’s worth investigating.
Try to answer simple questions using your reports. How much did you spend on fuel last quarter? What was your revenue last month? What’s your biggest expense category? If you can pull a report and get a believable answer, your categorization is probably reasonable. If the answers seem wrong or you can’t find the information at all, the books need work.
Check for uncategorized transactions. Monthly bookkeeping should result in every transaction being properly categorized. If you have a growing pile of items labeled “uncategorized” or “ask my accountant,” those need to be addressed before your reports mean anything.
Look at consistency over time. Pull a profit and loss report for the last three months side by side. Do similar expense categories show similar amounts month to month? A sudden spike or drop might be real, but it could also mean transactions got categorized differently. Supplies that were $200 per month suddenly jumping to $2,000 could mean equipment got miscoded as supplies.
Warning signs that suggest bigger problems include negative bank balances when you know you have money, accounts receivable showing invoices you know were paid months ago, inventory values that don’t match what’s actually on your shelves, and loan balances that don’t decrease when you make payments.
If you’re finding discrepancies or your balance sheet has unexplained amounts, it might be time for a bookkeeping cleanup. Going back to fix errors and properly categorize transactions gets your books to a trustworthy starting point. From there, staying on top of monthly reconciliation prevents the problems from building up again.
Accurate books should tell you where you stand financially without guessing. If you’re making business decisions based on what you think the numbers are rather than what your reports show, that’s the clearest sign something needs attention.
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More Questions
How do I track subcontractor payments for tax purposes?
Collect a W-9 before the first payment, record every payment in your accounting software by vendor, and keep invoices as documentation. You'll need this information to issue 1099-NEC forms for anyone paid $600 or more.
Read answerWhat's the best way to track expenses in QuickBooks?
Connect bank accounts for automatic imports and set up categorization rules for recurring transactions. Use the mobile app to capture receipts digitally and reconcile your accounts weekly instead of monthly.
Read answerWhat information does a bookkeeper need from me?
A bookkeeper needs access to your financial accounts, business formation documents, and receipts to keep accurate books. Start with bank and credit card logins, your EIN letter, and any prior financial records or tax returns.
Read answerHow do I add my accountant to my QuickBooks account?
In QuickBooks Online, go to Settings, then Manage Users, and invite them under the Accountant section. You just need their email address. They'll get an invite and can access your books once they accept.
Read answerWhat business expenses are not tax deductible?
Personal expenses, fines and penalties, political contributions, entertainment costs, and commuting are not deductible. Club memberships and certain clothing also fall outside what the IRS allows.
Read answerHow do I prepare my books for tax season?
Start by reconciling all accounts through year-end, then review your expense categories and gather supporting documents. The goal is giving your tax preparer clean, accurate records with everything they need.
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