It usually happens the same way. Business gets busy, the bookkeeping slides for a month, then three, then a year. Now tax season is coming, the bank wants financial statements, or you simply have no idea whether you're making money.
You're not the first, and it's fixable. Catch-up bookkeeping is one of the most common jobs I do.
Signs you need catch-up bookkeeping
- You haven't reconciled your bank or credit card accounts in months
- Your QuickBooks file has hundreds of transactions sitting "for review"
- You can't produce a profit and loss statement you'd trust
- Your tax preparer keeps asking for numbers you don't have
- You're paying sales tax or payroll tax from memory rather than from reports
Step 1: Gather the records
You don't need everything perfectly organized. You need access to:
- Bank and credit card statements for every account, for every month you're behind
- Loan statements, including any vehicle or equipment loans
- Payroll reports if you have employees
- Sales records: invoices, your point-of-sale system, or your payment processor (Square, Stripe, PayPal and similar)
- Receipts for larger purchases, or at least an idea of what they were
- Last year's tax return, which shows where the books are supposed to start
The statements matter most. Everything else adds detail.
Step 2: Set a clean starting point
Before entering anything new, the opening balances have to be right. That usually means matching the books to the last tax return or the last period that was properly closed. If the starting point is wrong, every month after it is wrong too.
Step 3: Record and categorize every transaction
Each deposit and payment gets recorded and assigned to the right category, such as revenue, cost of goods, rent, fuel, owner draws or loan payments. A few things matter a lot here:
- Personal and business spending are separated. If personal charges went through the business account, they're recorded as owner draws, not expenses.
- Loan payments are split between principal and interest. Only the interest is an expense.
- Transfers between your own accounts are recorded as transfers, not as income and expenses. Otherwise revenue is overstated.
- Sales tax collected is recorded as a liability, not as income.
Step 4: Reconcile every account, every month
Reconciliation means proving that the books match the bank statement to the penny, month by month. This is the step that makes the books trustworthy, and it also catches duplicate entries, missing deposits and bank errors.
Step 5: Review and produce financial statements
Once every account is reconciled, you get a profit and loss statement, a balance sheet and a cash flow statement for the full period. Those are what your tax preparer and your lender need, and what you need to make decisions.
How long does it take?
It depends on the number of accounts, transactions and months involved, and on how easy the records are to get. A small business a few months behind can often be caught up in about a week once the statements arrive. A full year or more with several accounts takes longer. The slowest part is almost always collecting missing statements, so start there.
Staying current afterwards
Catching up is a one-time project. Staying current takes a monthly routine:
- Record and categorize transactions every month
- Reconcile every bank and card account
- Review the profit and loss statement and balance sheet
- Handle sales tax and payroll from the reports, on schedule
Most of my clients move straight from a catch-up project into a monthly bookkeeping arrangement, so the books never fall behind again.
Let's get you caught up
I've been keeping books for 38 years, and I work with businesses across Texas and beyond, fully online. Send me your statements and I'll handle the rest. Book a short intro call to talk about where your books stand.