How Far Behind Are Your Books? A Five-Minute Self-Check

Most owners know when the books are behind. Far fewer know by how much. "A few months" can turn out to be a year once someone looks, because the last time the books felt current is not the same as the last time they were right.

These eight questions take about five minutes. Answer them honestly, with the bank's website open if you can, and you will know what you are dealing with before you talk to anyone.

The eight questions

1. When was each bank account last reconciled to a statement? Not reviewed in the bank feed: reconciled, with the ending balance in the books matching the ending balance on the statement. Answer for every account, including the ones nobody uses much.
2. When was each credit card last reconciled? Cards fall behind faster than bank accounts because the statements arrive on their own schedule.
3. Does the revenue in your books match what your sales platform reports? Pick last quarter and compare the books with Stripe, Square, Shopify or your invoicing system.
4. Is anything sitting in Uncategorized, Ask My Accountant or Opening Balance Equity? A balance in any of these is work that was put off.
5. Is the list of unpaid customer invoices accurate? If customers appear to owe you money they paid months ago, payments have not been matched.
6. Is the list of unpaid bills accurate? The same check, the other way round.
7. Do the payroll figures in the books match your payroll platform's reports? Wages and payroll taxes are where a missed entry shows up first.
8. Could you hand a lender last year's profit and loss and balance sheet today, and stand behind them?

What your answers mean

Every account reconciled within the last month or two, and the rest checks out. You are current. What you need is to stay that way, which is what monthly bookkeeping is for.

The latest reconciliation was three months to a year ago, or several answers were "not sure". You are behind, and the backlog is a defined project: every missed month is reconciled in order, then the books are brought up to date and kept there.

Some accounts have never been reconciled, or the honest answer to the last question is no. The books need rebuilding before anyone relies on them. If tax returns were already filed from these numbers, tell your tax preparer once the catch-up is done; they decide whether anything needs to be amended.

A file can also be current and still wrong. If the dates look fine but questions 3 to 7 failed, the problem is cleanup, not catch-up. Our article on QuickBooks file repair or cleanup explains the difference.

Where a catch-up starts

The work begins with paperwork, not software. Before any transaction is touched, these are gathered for every month in the backlog:

• Statements for every bank account, credit card and loan. Most banks let you download past statements yourself.
• Payout reports from each payment processor, showing gross sales, fees and refunds.
• Payroll reports for the same months.
• Access to the accounting file, ideally as a separate user rather than a shared login.

Then each account is reconciled month by month, oldest first, because every month's closing balance is the next month's starting point. Skipping ahead means rebuilding twice.

Three things not to do while you are behind

• Do not accept everything in the bank feed in bulk. It clears the screen and buries the errors.
• Do not force a reconciliation to balance by adding an adjustment for the difference. That difference is the problem you are trying to find.
• Do not delete old transactions to tidy up. Deleting breaks past reconciliations and makes the trail harder to follow.

Common questions

Can I catch up the books myself? If the backlog is a few months across one or two accounts, often yes. Work oldest month first, reconcile every account to its statement, and stop at any difference you cannot explain rather than adjusting it away. Once the backlog runs to many months, many accounts or a payment processor, the time it takes usually costs more than the work.

What if some statements are missing? Banks and card issuers can usually provide past statements on request, and payment processors let you export payout reports for past periods. Anything that genuinely cannot be found is listed and noted in the record of corrections, not guessed.

Should I fix the past first, or start fresh from today? Starting fresh on its own leaves last year's numbers unreliable for your tax preparer and for any lender. The practical answer is both at once: keep the current month current, and catch up the backlog alongside it.

Next step

If your answers put you in the second or third group, our catch-up bookkeeping service is built for exactly this: a fixed quote after a free assessment, then the backlog reconciled and documented. We work remotely with businesses anywhere in the US; our pages for Dallas, Atlanta and Denver describe what a catch-up involves for the kinds of businesses there.

Once the books are current, the year-end package in Tax-Ready Books shows what your preparer should receive. The rest of this chapter is in the guide.