Signs your books need a cleanup, and what one costs

Your books need a cleanup when you can't trust the numbers enough to make a decision or file a return. The cost depends mostly on how many months are behind and how many transactions each month holds, so the only honest quote comes after someone looks.

The signs

• Bank or card accounts haven't been reconciled in months, or nobody knows the last date.
• A large uncategorized or ask-my-accountant balance that keeps growing.
• Your cash on the Balance Sheet doesn't match the bank.
• Revenue on the P&L doesn't line up with your membership platform's reports.
• Owner draws, transfers or loan payments sit in expense categories.
• Your CPA sent the books back, asked for an extension, or charged extra to fix them.
• You stopped looking at your reports because you don't believe them.

One of these is a fix. Three or more usually means a cleanup.

What drives the cost

I can't give you a price without looking, and you should be wary of anyone who does. These are what move it:

• Months behind. Each month has to be reconciled to its statement. Twelve months behind is a lot more work than two.
• Transaction volume. A practice with 150 transactions a month cleans up faster than one with 600.
• Number of accounts. Every checking account, savings account, card and loan is reconciled separately.
• Missing documents. Missing statements, receipts or payroll reports have to be tracked down first.
• Mixed personal spending. Sorting personal charges out of business accounts takes time.
• Platform deposits. Membership deposits that arrive net of fees and refunds take extra work to split.

In a made-up example, two practices are each six months behind. One has a single checking account and card with clean statements. The other has four accounts, missing statements for two months and personal charges mixed in. The second cleanup can take several times longer.

Fix it all, or start fresh?

You may not need every past year fixed. Often it makes sense to clean up only what your CPA still has to file and start fresh from there. This post walks through that choice.

How to keep the cost down

• Gather every statement for every account for the months behind, before work starts.
• Write down any loans, equipment purchases and big one-off payments you remember.
• Stop paying personal bills from the practice account now.

What I'd do this week

• Find the last date each account was reconciled.
• Count how many months are behind and how many accounts you have.
• Ask your CPA which years they still need clean books for.

Common questions

How long does a cleanup take?
It depends on the same things as the cost: months behind, volume, number of accounts and how quickly missing documents turn up. Ask for a timeline along with the quote.

Can I keep my current bookkeeper during a cleanup?
You can, but two people working the same books at once causes mistakes. Agree on who owns which months.

Will a cleanup change my past tax returns?
It can. If the cleanup finds errors in a year that was already filed, your CPA decides whether an amended return is needed.