Is Your Bookkeeper Doing a Good Job? A Business Owner's Guide

Is Your Bookkeeper Doing a Good Job? A Business Owner's Guide

As a business owner, you wear many hats. Understanding the intricacies of bookkeeping might not be your favorite, but knowing if your bookkeeper is keeping your financial house in order is crucial. Good bookkeeping isn't just about accurate numbers; it's about giving you the clarity and confidence to make smart business decisions, secure funding, and sail through tax season.

What Exactly Is Bookkeeping?

Think of bookkeeping like hiring a professional organizer for your home or office, but for your money. Just as an organizer comes in to sort through clutter, label everything, and create a logical, easy-to-follow system for your physical belongings, a bookkeeper does the same for your business's financial transactions. They take all the money coming in and going out – sales, expenses, payments, bills – and meticulously categorize, record, and organize it. The quality of a good organizer's work is evident in the clean labels, systematic patterns, and logical placement of everything; similarly, a good bookkeeper's work is seen in the clean, patterned, and easily understandable structure of your financial records. Without this structure, finding what you need, understanding your financial health, or defending yourself in an audit becomes a chaotic nightmare.

If you're using QuickBooks Online, here’s a simple checklist to help you peek behind the curtain and assess your bookkeeper's performance.

1. Are Your Bank Transactions Tidy?

Start by checking your bank feeds. In QuickBooks Online, head to the "Banking" tab (or "Transactions" > "Bank transactions"). This is where your bank and credit card activities flow into QuickBooks.

• Are All Accounts Connected? First, confirm that all your business bank accounts and credit card accounts are actively feeding into QuickBooks. You should see a tile for every single account your business uses. If an account isn't connected, your bookkeeper isn't getting all the data.
• Look for "For Review" (Uncategorized) Transactions: Ideally, this section should be empty or have very few transactions. A constantly growing number here indicates your bookkeeper isn't keeping up.
• Check the Dates: Are there transactions from months ago sitting in "For Review"? If so, that's a red flag. All transactions should be categorized and matched promptly, generally within a few days to a week of appearing in the feed. Old, uncategorized transactions mean your financial reports aren't truly current.

2. What's the Story with "Ask My Accountant" Accounts?

Your Chart of Accounts is like the backbone of your financial system. It categorizes every dollar moving in and out of your business. Sometimes, bookkeepers use "holding" accounts for transactions they're unsure how to categorize.

• Locate "Ask My Accountant" (or similar): In QuickBooks, go to "Accounting" > "Chart of Accounts." Scroll through the list. Do you see accounts with names like "Ask My Accountant," "Miscellaneous," "Temporary," or "Suspense"?
• Inspect Transactions: Click on these accounts to view the transactions within them. These accounts should be used minimally, if at all, and ideally cleared out regularly. A large number of transactions or old transactions sitting in these accounts means your bookkeeper is deferring decisions and your books aren't truly complete.

3. Are "Uncategorized" Accounts Empty?

QuickBooks Online sometimes defaults to "Uncategorized Asset," "Uncategorized Expense," or "Uncategorized Income" for transactions it can't automatically match.

• Check Your Chart of Accounts: Again, under "Accounting" > "Chart of Accounts," look for these specific accounts.
• Review Transactions: Like "Ask My Accountant," these accounts should contain very few, if any, transactions. Any transactions here, especially old ones, indicate uncategorized funds and inaccurate reporting. They are often a sign of a bookkeeper taking shortcuts or not understanding where to properly post transactions.

4. Is Your Bank Account Reconciled Regularly?

Reconciliation is the process of matching your QuickBooks transactions to your actual bank or credit card statements, ensuring everything balances. It's a critical step in catching errors, fraud, and ensuring accuracy.

• Check the Reconciliation Date: Go to "Accounting" > "Chart of Accounts." Find your main bank and credit card accounts. You'll see a column showing the "Last Reconciled Date."
• The 60-Day Rule: This date should be relatively recent – ideally within the last 30 days, and absolutely no older than 60 days. If your accounts haven't been reconciled in months, your bookkeeper isn't confirming the accuracy of your transactions, which can lead to big problems down the line.
• Inspect Unreconciled Transactions: While in the Chart of Accounts, click on the "View register" (or just "Register") link next to your bank account. In the register, you can usually filter transactions by their reconciliation status. Filter to show "Unreconciled" transactions. There should be no old transactions present from before the last one or two successful reconciliations. Any lingering old unreconciled items mean something is fundamentally off—the transaction either truly happened and needs to be reconciled, or it never happened and needs to be deleted.

5. Is Your Chart of Accounts Clean and Logical?

A well-organized Chart of Accounts makes your financial reports understandable and useful.

• Review Account Names: Are the names clear and concise (e.g., "Office Supplies" rather than "Stuff for Office")?
• Check for Duplicates: Are there multiple accounts that seem to serve the same purpose?
• Look for Logical Numbering (if used): Some businesses use account numbers (e.g., 4000s for income, 5000s for expenses). If your bookkeeper currently doesn't use account numbers, implementing a good numbering system can help structure your accounts in the order you want to see them. If your bookkeeper does use numbers, do they follow a clear, consistent pattern? A messy Chart of Accounts makes it hard for you to interpret reports and hard for accountants to prepare your taxes.
• Run a Profit & Loss (P&L) Report: Go to "Reports" and find your "Profit & Loss" report. Look at the categories listed under Income, Cost of Goods Sold (COGS), and Expenses. Are these categories granular enough for you to genuinely understand where your money went and where it came from? Can you draw meaningful conclusions about your business performance? If you've ever filled out a census survey, insurance audit, or applied for a loan, you know how detailed financial information can be required. Ensure your income and expenses are categorized to a sufficient level to allow for easy completion of these processes, and to prevent huge surprises after the year is done when nothing can be done about it.

6. Are Your Accounts Payable (What You Owe) in Order?

Knowing who you owe and when is vital for cash flow.

• Run an Accounts Payable Aging Report: In QuickBooks, go to "Reports" and search for "Accounts Payable Aging Summary."
• Analyze the Report: This report shows all your unpaid bills and how old they are. Are there bills listed that you know you've already paid? Are there very old bills that should have been paid or disputed? This report reflects how well your bookkeeper is managing your bills and vendor relationships.

7. Are Your Accounts Receivable (What You're Owed) Accurate?

Getting paid on time is critical. Your AR report tells you who owes you money.

• Run an Accounts Receivable Aging Report: In QuickBooks, go to "Reports" and search for "Accounts Receivable Aging Summary."
• Analyze the Report: Look at who owes you money and for how long. Do these amounts match your understanding? Are there old invoices that should have been collected or written off? Mistakes here can mean you're not collecting revenue efficiently, or your bookkeeper isn't recording customer payments correctly.
• Check for Old Invoices from Prior Tax Years: Are there invoices present on this report from previous tax years? If your business operates on an accrual basis, you’ve likely already paid taxes on income from these uncollected invoices. If they have, in fact, been paid (but not recorded as such in your books), there’s a high likelihood your income may have been double-recorded – once when the invoice was issued and again when the payment was deposited, leading to you paying too much in taxes.

8. Do Your Top Customers & Vendors Show a Clean Pattern?

Consistency is key in good bookkeeping. Choose a few of your largest or most frequent customers and vendors.

• Review Their Account History: In QuickBooks, go to "Sales" > "Customers" (or "Expenses" > "Vendors") and click on a key customer or vendor. Look at their transaction history.
• Check for Patterns & Documentation: Do you see a consistent way transactions are entered? Are dates on vendor invoices accurately reflected in QuickBooks? Is documentation (like receipts, invoices, or contracts) consistently uploaded and attached to every transaction? A clear, repetitive pattern indicates systematic and careful work, ensuring uniformity and reliability in your records over time.

9. Where Are Your Documents Archived?

Every single financial transaction requires substantiating documentation to prove it happened and why. This is crucial for verifying your books, especially during audits, and for daily business operations.

• Are All Documents Centralized and Searchable? Do you know exactly where all your invoices, receipts, contracts, and other supporting documents are stored? Is there a system in place that allows you or your bookkeeper to quickly locate any document for any transaction?
• Ease of Access for Audits: In the event of an audit, the ability to rapidly and confidently produce documentation for questioned transactions can significantly help ensure a smooth, stress-free audit process. If your documents are scattered, incomplete, or hard to find, it’s a major red flag for the quality of your overall financial record-keeping.

What Now?

If, after this quick check, you find several red flags, it might be time for a conversation with your bookkeeper. Remember, good bookkeeping is an investment in your business's health and future. It brings peace of mind, saves you money on taxes, facilitates better relationships with your accountant and other professionals, and ultimately helps you make smarter decisions. Don't let neglected books cause you undue stress or hidden surprises. If you suspect your bookkeeper isn't doing a good job, or simply want a professional assessment, contact us for a consultation and analysis. We're here to help you get your books in impeccable order.