Get Your Business Back on Track: 4 Steps to Clean Up Your Bookkeeping

As a young entrepreneur, it can be tempting to handle all aspects of your business independently, including bookkeeping. Many find that bookkeeping is more complicated than initially thought, and their records can quickly become a mess. If you find yourself in this situation, you’re not alone. Many businesses need help with messy bookkeeping records due to their busy schedules, but solutions are available to help clean things up.

In this article, we look at the consequences of messy bookkeeping, how it got there in the first place, and how to clean them up to get your business back on track.

How do I know if my books are messy?

Have you ever tried to work at a cluttered desk? Or in a messy kitchen? Or in a crowded garage? It’s like searching for a needle in a haystack, wasting precious time looking for what you need, and then finding it. It takes work to focus and work efficiently in those situations.

The same is true for your business finances. Messy bookkeeping can be overwhelming and frustrating to deal with, making it difficult to make informed decisions about your business’s future.

If you´re not sure if your books are in order, answer these questions:

Are your books organized? (Or do you have a file full of receipts or not enough receipts attached for proof?)
Do you reconcile monthly? (Or does this rarely happen or occur in bulk a few months later?)
Do you know the exact standing of your bank accounts? (Or are you afraid to log on?)
Do you know how much you’re spending each month? (Or do you have no idea?)
Do you have leftover funds in your account every month? (Or is everything gone?)
Do you know if your business is profitable?

If you answered no to any of these questions, you would benefit tremendously from cleaning up your bookkeeping! If you don´t, you will make decisions based on incomplete or inaccurate data, which can harm your bottom line.

How to clean up your bookkeeping

Step 1: Identify the problem

Once you understand why your records are a mess, you can take steps to clean them up. The first step is to identify the root cause to prevent further damage. These common red flags can signal a problem:

General ledger errors, cash discrepancies, and/ or customer and vendor invoice inconsistencies.
Unauthorized withdrawals, excessive business expenses, and/ or bank fees and penalties.
Negative cash or credit balances, unaccounted-for interest on cash and credit accounts, and/ or asset overestimation.

If you review your records and find any errors, inconsistencies, and missing information, note what needs to be updated or corrected. This helps identify why this happened – e.g., lack of organization, inadequate knowledge, poor data entry, etc. – so you can see what steps need to be taken to clean up your bookkeeping.

Step 2: Get organized

If you´re not organized from the start, your records can become quickly disorganized and difficult to manage. That’s why the next step is to get your records organized. This could be as simple as setting up folders for different types of records or using a digital filing system.

One of the biggest causes of messy bookkeeping is not separating personal and business accounts! It might not seem like a big deal, but many studies have shown that most start-ups and small businesses fail because they do not do this from the start. If you haven´t already, separate your accounts:

You will have a clear picture of your business´s financial position at any given moment.
You can easily record all business income and expenditures.
It saves you time and effort when filing taxes and repaying debts.
It makes it so much easier to transition to a cloud-based accounting system later on.

Step 3: Implement a bookkeeping system

To clean up your bookkeeping (and keep it that way for the long term), you must create a bookkeeping system that works for you. The easiest way to do this is to choose appropriate accounting software that does all of the following:

Integrates your bank account.
Tracks and records all sources of income and expenditure.
Allows you to label and classify all expenses.
Reconciles your business accounts with the actual expenditures and expenses.

If you implement a system that does all of the above, you can easily identify and correct any discrepancies as they arise. Just make sure that you keep up with this system! For example, schedule some time once a month to reconcile your bank statements and set your budget for the coming month. That way, they will stay manageable and won’t become this huge task that you keep avoiding but know must be done.

Step 4: Get help

If you’re feeling overwhelmed or need more time or expertise to clean up your records, consider hiring a professional bookkeeper to help. A bookkeeper can help you get your records in order and keep them that way.

Bookkeeping is integral to running a successful business, so getting expertise in this area is a wise investment. They can help with the following:

Cleaning up your bookkeeping.
Creating and implementing a bookkeeping system.
Reconciling your accounts regularly.
Sending you monthly financial reports.
Long-term planning.
Avoiding losses, fines, penalties, and additional expenses.
Saving you time, effort, and money.