Bookkeeping & Payroll
10 Signs Your Books Need a Cleanup
Most owners can feel when their books are off, but can't articulate why. Here are the ten specific signals that mean cleanup is needed — and most of them are quick to spot if you know where to look.
Bank accounts haven't been reconciled in months
Unreconciled accounts are the single biggest red flag. Without reconciliation, no number on the P&L or balance sheet can be trusted.
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Negative balances on accounts that shouldn't be negative
Negative cash, negative AR, or negative inventory means transactions were entered in the wrong direction. Each one is a clue, not a number.
Uncategorized income or 'Ask my Accountant' is a large balance
Catch-all accounts shouldn't carry meaningful balances. If they do, real revenue and expenses are sitting there miscategorized.
P&L doesn't match what you feel happened
You had a strong year and the books show a loss — or vice versa. Either way, the numbers are wrong somewhere.
Owner expenses run through the business
Personal expenses on the business card with no reclassification or reimbursement. Distorts profit and complicates the return.
Multiple chart of accounts changes mid-year
Year-over-year comparisons become useless. Often signals someone was guessing at categorization.
Loans booked to revenue
PPP, EIDL, or owner loans coded to revenue inflate income and create phantom tax bills.
Payroll doesn't match payroll provider reports
If books show $200K of payroll and the provider shows $230K, one of them is wrong. Usually the books.
Sales tax payable doesn't match returns filed
Sign of either missed returns or miscategorized payments. Both create audit risk.
Your CPA asks the same questions every year
Repetitive questions in February usually mean the underlying bookkeeping isn't built to produce return-ready data.
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