12-Step Accounts Cleanup Process for Solopreneurs and Small Business Owners

As the business moves forward, accounts often get left behind. And before you know it, it’s months (and sometimes years) together since your books have been properly updated. The result? Disorganized records and messy finances only lead to added stress. Accounts cleanup helps you tame the clutter and brings much-needed financial clarity for business growth.

While most businesses – due to lack of time and efficiency – choose to outsource account cleanup services to professional CPAs, some choose the DIY route. For them, here’s an expert accounts cleanup checklist that can help you get all your financial ducks in a row:

1. Collect Your Financial Records

The first step of accurate bookkeeping is collecting your financial records. Start by gathering all your financial documents:

• Bank statements: Saving accounts, credit cards, and any other accounts that are being used for business finances.
• Receipts (physical or digital): Purchase documents, travel receipts, entertainment coupons, or any other business-related expenses.
• Invoices (sent or received): Secure copies of invoices that you’ve received from vendors and issued to clients.
• Other financial documents: These include payroll records, tax statements, loan documents, investment account statements, and more.

Organizing all your records in one place will make it easier to review and update your accounts. Don’t worry if you don’t have time to sift through mountains of paper. You can use mobile scanning apps to scan and save all your bills and receipts.

2. Review Your Chart of Accounts

Your chart of accounts is the backbone of your bookkeeping system. Review it to ensure that it accurately reflects your business activities. Remove unused accounts, add relevant ones, and organize them logically to align with your operations.

3. Reconcile Bank Accounts and Credit Card Statements

The next step is to reconcile your bank account. The process involves comparing your bank and credit card statements with your accounting records to identify and resolve discrepancies. Common items include

• Missed transactions
• Duplicate entries
• Incorrect entries
• In-transit deposits
• Outstanding checks

Reconciliation ensures that your records match your actual financial activities.

4. Review your outstanding invoices and bills

Review vendor invoices to make sure you haven’t overlooked any outstanding invoices or bills.

• Note down all unpaid vendor invoices as accounts payable
• Look for all outstanding payments for which you have raised the invoices but have not received the payments. Log them into accounts receivable.

Taking stock of these items provides a clearer picture of your financial obligations and potential income. Also, it helps in better financial planning. As you fix your accounts, check why they were left uncategorized. Wasn’t the delay atthe client’s end? Did you miss sending the invoice? Or did you fail to account for it? These questions will help you learn about the errors and gaps in your accounting process and fix them as needed.

5. Update Accounts Payable and Receivable

Now is the time to tackle your bills and invoices head-on.

For accounts receivable: Follow up on overdue invoices to ensure timely payment.

For accounts payable: Record unpaid bills and prioritize clearing overdue payments.

6. Update Fixed Assets and Depreciation

Review your fixed assets (like equipment, furniture, vehicles, and property) and ensure their values are accurately recorded. Calculate and update depreciation to reflect their current worth on your balance sheet.

7. Reconcile Credit Card Statements

As with bank reconciliation, you need to align your credit card statements with your business bookkeeping records too. For this, match your credit card transactions with corresponding entries in your accounting system.

Carefully review your transaction and remove personal expenses, if any, to make sure that only business-related charges are reflected in your bookkeeping. Categorizing personal and business expenses is essential for an accurate financial overview.

8. Clean Up Payroll Records

If you have employees, review your employees’ payroll records to ensure they are paid correctly and the records comply with tax laws. Resolve all potential discrepancies in wages, taxes, or benefits.

9. Verify Tax Records

Gather all your tax-related documents, including sales tax, payroll tax, and income tax filings, and check for missed deadlines or unpaid taxes. This step ensures all your taxes have been paid on time and the necessary paperwork is completed and submitted accurately. This prevents fines and penalties and helps you stay on the right side of the law.

10. Review and Adjust Financial Statements

Go through your income statement, balance sheet, and cash flow statement to ensure all figures are accurate and reflect your current financial status. Review and categorize all income and expenses into specific categories. Unassigned transactions can give a murky picture of your accounts and must be avoided under all probabilities. Review all your future liabilities and losses and make the required provisions for all uncertainties. This practice helps maintain financial stability, meet unexpected costs, and accurately reflect your financial position.

11. Back-Up Your Data Securely

Once the cleanup is complete, it’s time to back up your financial data to prevent future losses. Use a reliable cloud storage service or an external hard drive for secure backups. If you choose to manage your own data backup system, make sure to add multiple layers of security/ encryption technology to safeguard the data of customers, clients, and partners.

12. Choose a Reliable System for Ongoing Maintenance

To avoid future chaos, establish a process for regular bookkeeping. For this, schedule routine bookkeeping activities. Set aside time weekly or monthly to reconcile your accounts, update transactions, and review financial statements. This will help you find and fix routine accounting issues before they turn into giant problems. Also, automate outsource bookkeeping services to reputed service providers to make sure your books and accounts are up-to-date and free of all kinds of discrepancies.

So, here you go! This 12-step process can help you transform your messy financial records into a clear and organized system. Remember, with a clear picture of your financials, you can make informed decisions and set your business up for growth.