In the world of bookkeeping, “procrastination” usually translates to “expensive mess.” Whether you are preparing for tax season, looking for a business loan, or simply want to know if you’re actually making money, cleaning up past accounts is the first step toward financial clarity.
Reconcile the “Ghost” Transactions
The most common issue in messy books is “zombie” entries—transactions that exist in your software but never happened in real life. This often happens when a check is written but never cashed, or a bank feed creates a duplicate entry. Start by performing a bank reconciliation for every month of the past year. If you find outstanding items from six months ago, investigate them. If a check hasn’t cleared by now, it likely never will.
The Accounts Receivable (AR) Deep Clean
Unpaid invoices can artificially inflate your “income” on paper, making you pay taxes on money you haven’t received. Look at your Aging Summary. If you have invoices from two years ago that are still “Open,” be honest with yourself: are you going to collect that money? If not, write it off as Bad Debt. This cleans up your balance sheet and provides a tax deduction for the lost income.
Review Your Chart of Accounts
Many business owners make the mistake of being too specific. You don’t need a separate category for “Blue Pens” and “Red Pens.” Consolidate your accounts. If your Profit & Loss statement is ten pages long, it’s useless for decision-making. Aim for broad, meaningful categories like “Office Supplies” or “Software Subscriptions.”
Verify Sales Tax (GST/HST)
One of the biggest risks in “dirty” books is misfiled sales tax. Ensure that the GST/HST you collected matches what you reported to the CRA. If you’ve been “guessing” on your filings, now is the time to run a sales tax report and make an adjustment. It is always better to self-correct a mistake than to have an auditor find it later.
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