Running the accounting side of your business in addition to daily operations is hard enough to do as a business owner, not only do you need to stay on top of your game when it comes to delivering a good product and keeping clients happy, but you also need to ensure that the numbers in your business meet GAAP guidelines while they are also in line with your business goals.
What is accounting clean-up?
Accounting cleanup services can be seen as a monthly recon of your books, financial statements, and ledgers to ensure correspondence of the numbers and consistency throughout. Because accounting is a chronological series of your business’ income and expenses, bookkeeping cleanup involves researching and cross-checking the correspondence of these entries across all records.
The importance of accounting clean up
Missing just one transaction in your books can have a ripple effect on the accounting side of your business, and with just a few gaps in your accounting system, your business can be left with severe financial clutter that can have knock-on effects on both the economic outlook of your business and the credibility of your brand to clients.
Setting time aside to tend to the regular clean-up of your books, is beneficial to every business. Not only does it allow you to identify accounting inconsistencies before they create ripple effect errors that may cost you time, money, and panic when it comes to tax filing season; but it will also ensure that as a business owner, you have regular visibility of what is really happening on the financial side of your business.
The accounting clean-up process
To do a thorough accounting clean-up, the experts don’t necessarily advise lining up the books to financial statements as the only step in the process. Yes, this serves as a starting point to identifying inconsistencies, but doing a thorough clean-up of your accounting involves three important steps.
1. Establish a transaction adjustment plan
Accounting clean-ups are just that: clean-ups. In the field of accounting, it is inevitable for discrepancies to creep in, especially in fast-paced environments where business owners are doubling up as accountants or performing bookkeeping functions. It is important to accept that there will be accounting inconsistencies but it is even more important to establish a sound plan around adjusting these as an approach to simply jumping in to align transactions may create further consequences later on. Accounting clean-ups should involve a thorough investigation of accounts and books to find the story behind the discrepancies and the adjustment plan should take this into account.
2. Consider an expert
When it comes to clean-ups, your plan can either make or break the process. As noted, discrepancies can’t always be avoided but correction thereof is key. This requires the skills of an accountant that is able to analyze books and transactions at high-level, and who has insight into the nature of the business. It is advisable that the same accountant, with the expertise to tackle adjustments, executes a clean-up process.
3. Establish consistent clean-up timeframes
When it comes to an accounting clean-up it is important to note that errors are better fixed sooner than later, because one wrong entry can create an accounting mess throughout. Oftentimes accounts are linked to money coming in and going out, and when this is not tended to swiftly it can create a skewed idea of the financial state of your business, or worse: incorrect billing or labeling of clients (as bad payers, when they may not be). Monthly clean-ups will ensure a tight grip on your books and allow for easy clean-up that won’t necessarily cause issues that become out of control.
With reliable accounting software, your business can weed out a number of accounting errors that commonly occur with manual bookkeeping, but you would still require the expertise of either a professional CPA to discern and decipher the figures, especially when embarking on a major accounting clean-up.
At Fusion CPA, we offer outsourced accounting services. Our team has years of experience with major clean-ups and can help you establish accounting processes to safeguard against big accounting messes within your business. We also do monthly accounting check-ins and clean-ups for businesses across different industries.
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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.