Let’s start with this word: RECONCILIATION. Do you know what it means? Do you, or your current bookkeeping team understand the importance of this process?
Reconciliation is one of the keys to having correct, clean data. Most people used to understand balancing the checkbook at the end of each month. That is the simplified version of the process. The many mistakes we see have to do with duplicate bills, or bills paid by check instead of bill payment. Also, making sure the inventory that makes the business work can be quite costly. Are you able to track what bills were paid, what refunds are due, and what is still owed. Reconciliation is the step needed to catch mistakes in these areas. When you finish a month, the reconciliation should leave you with ONLY those checks and deposits that are still due. If you see old dates in the list that aren’t checked off yet, there is a problem in your books.
Liability accounts, clearing accounts, tax accounts, all have to be reconciled with their corresponding payment accounts so that you end up with zeros in the right places. This means you will have real data that shows your true income, expenses, and what is still due. Without it, you may think you are doing fine and end up paying more out in expenses than you are actually receiving for income. Data is key to tracking your Profit and Loss.
Need a loan? The banks will ask for your balance sheet. If your liabilities, assets, income and expense accounts aren’t correct, the professionals at the bank will spot it and your loan may be denied. Of course, the CPA doing your taxes might catch it, but if he doesn’t, you may end up with the IRS catching the problems, and no one wants that.
NOTE: Account cleanup can be expensive. It pays to do it right, get the right software, training, and bookkeeper from the beginning.