Behind on Your Bookkeeping? How to Decide What to Do First

How far behind are you, really?

Plenty of owners who feel behind on the books can't say by how much. So before deciding anything, find the last month where your books agree with your bank statement. Open the statement for that month, compare the ending balance with the balance your books show for the same day, and keep stepping back a month until the two match.

That month is your starting line. Everything after it needs work, and everything before it can be left alone. This one check turns a vague worry into a specific number, like four months or eleven months, and that number decides what happens next.

A month or two behind: catch up yourself, in order

If the gap is a month or two and the transactions are all sitting in your bank feed, you can usually catch up on your own. Work in date order. Record the transactions for the oldest unfinished month, then reconcile that month for every bank and card account before you touch the next one. IRS Publication 583 says to reconcile your checking account each month, and the reason is practical: an error found in March is easy to trace, while the same error found in September is buried under five months of new activity.

Download the statements before you start. The IRS notes that for most small businesses the business checking account is the main source for entries in the books, so the statements are the backbone of the catch-up and the receipts fill in the detail.

Several months behind: a cleanup and catch-up project

Once the gap runs to several months, doing it in the evenings tends to stall. Each month takes longer than you expect, new transactions keep arriving, and the backlog barely moves. This is the situation bookkeeping cleanup and catch-up is built for. Catch-up work finishes periods that were never done. Cleanup fixes periods that were done but are wrong, such as duplicated transactions, miscategorized expenses or an opening balance that never matched.

Many backlogs need a bit of both. The starting point is the same one you found above: the last month you trust, which accounts are involved, and how many months sit between then and now. Which months and accounts a project covers is agreed with Brittany before any work begins.

Missing records or mixed accounts: sort the paper first

Some books fall behind because the records never arrived in one place. Receipts sit in email, in the truck and in a card app, and business and personal spending go through the same card. When that is the case, gathering comes before recording. Download every business bank and card statement for the whole gap, then collect receipts and invoices for anything large or unusual.

The IRS says the documents behind an expense should show who was paid, how much, proof of payment, the date and a description showing it was for the business, and it adds that one expense may need a combination of documents. A card statement proves the payment but rarely says what was bought, which is why a receipt still matters. Photos and PDFs can stand in for paper as long as they carry the same detail, since the IRS holds electronic records to the same requirements.

Mixed accounts are the slowest part of any catch-up, because every shared line needs you to say whether it was a business cost. Publication 583 says to keep your business account separate from your personal checking account. Opening a separate account now will not fix the months behind you, but it stops the backlog from growing while you work through it.

A deadline is coming: work backward from the date

When a date is close, order of work changes. If you have employees, the payroll months often come first, because some Connecticut payroll items run on a quarterly clock. CT Paid Leave contributions, for example, are remitted to the CT Paid Leave Authority every quarter. In Connecticut, the personal property declaration covers the business property you owned on October 1 and is due to the town assessor by November 1, or the next business day when that date falls on a weekend, and state law sets a penalty of 25 percent of the assessment for filing late. An owner can ask in writing for an extension by November 1, and the assessor may grant up to 45 days for good cause.

The Wethersfield Assessor asks businesses to declare equipment, furniture, fixtures, computers and leasehold improvements every year, with the cost and acquisition date of each, and notes that business inventory is not taxable. Those costs and dates come straight out of your books. If the books are months behind in October, finish the periods that show your equipment purchases before anything else, then pick up the rest in order. If you are in another Hartford County town, check your own assessor's page, since each one runs its own process.

What to have ready before you ask for help

You don't need organized books to start a conversation about disorganized ones. It helps to know the last month you trust, which bank and card accounts the business uses, whether you work in QuickBooks Online or something else, and roughly how many months are involved. Don't send passwords or account numbers through a contact form. Ask how records should be shared once the scope is agreed.

After the catch-up, the question becomes how to stay current. Some owners take the monthly work back. Others move to monthly bank and credit card reconciliations or a fuller arrangement, so the same person who cleaned up the books keeps them. Either works, as long as someone reconciles every month.

If you would rather write than call, you can send Brittany a short note about how far behind things are and which accounts are involved.