The time for spring cleaning may be past, but your accounting records might benefit from a cleanup. If you have used the same accounting system for a number of years, you could have accounts or transactions that you don’t use anymore that are taking up space and cluttering your system.
Following are some recommendations for cleaning up your records:
- Review your balance sheet. Do you have accounts that should be zero and have small balances? Or, have you not reconciled a particular account in a while and it may need adjustment? Take a look at accounts with unusual balances or balances that are different from expectations and take the time to clean them up. Particularly for accounts like payroll liabilities, you may have small inaccurate balances that may be carrying over periods due to rounding adjustments.
- As part of the balance sheet review, take a closer look at your accounts receivable and payable balances. You may want to run aging reports. If you have zero balances on aging reports or old balances that should be written off, it would be a good time for a cleanup. Contact your accountant if you need help with the entries or for help matching up transactions that net to zero.
- Take a closer look at your fixed asset list. If you don’t have one on hand you can get this from your accountant. Review old items or fully depreciated assets to make sure they are still in use, and if not, remove them from your system. Also make sure the fixed asset listing agrees to your balance sheet, particularly if it is maintained by your accountant. If the fixed asset listing has categories that don’t agree with your chart of accounts, but tie in total, it is still a good idea to move things around so the records will agree.
- Review your bank reconciliations. If you have uncleared items that net to zero, or old items that should be written off, address them now or add a note to get rid of them when you do your next bank reconciliation. If you have old checks that are still potentially valid, now may be a good time to follow up with vendors to verify whether they still have checks you mailed them and you can issue them new ones if needed.
- When you are done with the balance sheet, move on to the income statement. It’s less obvious on the income statement if accounts need adjustment, but review your accounts for reasonableness. If you have anything in an “Ask My Accountant” account or have a high balance in a Miscellaneous account, figure out where those transactions should be recorded. If it seems like items are posting to the wrong accounts you may need to modify how they are set up. Particularly in QuickBooks it is easy to set up an item to record a particular type of transaction but if you begin using it for an new purpose, your transactions could get recorded to the wrong account.
- If you use memorized journal entries you may want to review them and make sure they are still posting to the correct accounts. You may need to update the amount of monthly depreciation expense, or the breakout on recording payroll.
- Review your chart of accounts, you may have unnecessary accounts that could be inactivated. Or, you could add or update your account numbers to what your accountant uses.
- Review your customer and vendor lists and inactivate old customers or vendors you no longer use.
- Consider condensing your data. If you have used a software like QuickBooks Desktop for a number of years there is an option to compress your data that will summarize transactions older than a certain timeframe. Make sure to make a full backup before you compress any data.