Five signs your books are behind

Most business owners do not plan to let their books slip. It happens a little at a time: a busy month, a software change, a bookkeeper who stopped answering, and suddenly you are not sure what is true anymore. Here are five signs the books are behind, and what each one usually means.

1. Your software balance and your bank balance do not match.

If the number in QuickBooks or Xero is different from what the bank shows, and you cannot explain why, the books are not current. This is the most basic test: a reconciled account agrees with the bank. When it does not, every report you run off that account is suspect.

2. You have a long list of uncategorized transactions.

Every accounting tool has a bucket for transactions you have not sorted yet. A few is normal at the start of a month. Hundreds, or a list that has been sitting there since last quarter, means nobody is keeping up. Uncategorized transactions are future problems waiting to be remembered.

3. You are not sure what you made last month.

If you cannot say, roughly, whether last month was profitable, the books are not doing their job. A current set of books answers that question without effort. A behind set makes you guess, and guessing is how good decisions go wrong.

4. Tax time is a scramble.

When the books are current, tax season is a calm handoff: your CPA gets clean reports and does tax work. When the books are behind, tax season becomes a cleanup project, and you pay for the cleanup on top of the return. If your accountant has to "fix" your books before they can start, the books were behind.

5. You avoid opening the accounting file.

This is the quiet sign nobody mentions. If looking at your books makes you anxious, it is usually because you suspect they are not right, and you do not want to find out how wrong. The trouble is that waiting makes it worse, not better. A three month cleanup is manageable. A two year reconstruction is expensive.

Any one of these signs might just mean a busy month. Three or more usually means the books need attention. The good news is that catching up is the same job as staying current, just compressed: reconcile the past months, categorize what is left, and lock each one. We quote the cleanup first, then move you onto a fixed monthly routine so the books stay closed from there on.

If any of this sounds familiar, the fix is not to feel bad about it. It is to pick a close date and start working toward it. Books that close every month are books you can actually use.