Your Books Are a Mess. Here’s What a Cleanup Actually Involves, and What It Should Cost.

Somewhere around October, a lot of business owners open their accounting software for the first time since spring and see it: a few hundred uncategorized transactions, a bank balance in the books that doesn’t match the bank, a “loan” that never went down, and a profit number that can’t possibly be right. Then the question: do I need a cleanup, and what does that even mean?

We run an accounting firm, and cleanups are about a third of the new clients we take on. Here’s what one actually involves, so you can tell a real one from an expensive guess.

Signs you need one

• The bank balance in your software doesn’t match your actual bank balance, and nobody can explain the difference.
• There’s a pile of uncategorized transactions, or an account called “Ask My Accountant” with a big number in it.
• Your loan balance in the books hasn’t moved in a year, or doesn’t match the lender’s statement.
• Your accountant asked for the books at tax time and then went quiet for three weeks.
• You don’t trust the profit number enough to make a decision with it.

Any one of these means the books are giving you wrong answers. Two or more means they’re giving you no answers.

What a good cleanup does, in order

The order matters more than anything else, because doing these out of sequence means paying to do things twice.

1. A diagnostic first. Two or three hours to find the last date the books were provably right, list every bank, card, and loan account, and measure the problem: uncategorized totals, unreconciled months, duplicates, loans that don’t match the lender. You should get a one-page summary and a fixed price before anyone starts fixing anything.
2. Freeze the starting point. Usually the last filed tax return. Everything before that stays as it is; the cleanup fixes forward. Reopening filed years is a separate decision with tax consequences.
3. Bank and credit cards, tied to every statement. Every month, every account, matched line by line to the bank’s own statement. This is where missing deposits and missing expenses turn up, and it comes before categorizing anything.
4. Duplicates removed. The check that was also entered as an expense, the sale recorded twice, the eleven versions of the same vendor.
5. Everything categorized and every balance sheet account tied to something real. Loans to lender statements. Payroll liabilities to payroll reports. Sales tax to filed returns. Cash you received but never deposited gets resolved, because it went somewhere.
6. A memo. What was wrong, what was fixed, what your tax preparer needs to know, and what has to change so this doesn’t happen again.

If a proposal doesn’t mention a diagnostic, a starting date, or a memo, ask why.

What your accountant needs from you

Read-only access to every bank and credit card account, or twelve months of statements for each. The loan agreements and the most recent lender statements. Payroll reports. Last year’s tax return. And one thing that saves more time than everything else combined: answer the question list in one sitting. A good firm batches its questions into a single list. Forty separate emails is a sign the work isn’t being run well.

What it should cost

A fixed fee, quoted from the diagnostic, usually priced per month of catch-up. Hourly cleanups make everyone nervous: you’re anxious about every email, and the firm has no incentive to be efficient. A fixed fee from a real diagnostic means the price is the price. Expect a change-order rate if you add accounts or want earlier years touched, and expect the fee to assume you’ll answer questions within a couple of weeks.

Why October, not January

If the books are wrong now, they’ll be wrong in January, when every firm is at capacity and your cleanup competes with tax season. Done in October, the cleanup finishes before year end, your tax return is built on real numbers, and you get the last quarter of the year to make decisions with a profit number you can trust. The best time to fix the books is before the year they describe is over.

What a CFO does with clean books

The cleanup isn’t the goal. The goal is what the numbers can tell you once they’re right. A fractional CFO reads three things first:

• Real margin. Once revenue and costs land in the right months, you can see which months made money and which didn’t, and usually why.
• Real cash. With loans and undeposited cash resolved, the bank balance and the books agree, and a 13-week cash forecast becomes possible. Before the cleanup it’s fiction.
• The tax estimate. A fourth-quarter estimate built on clean books instead of last year’s safe harbor is often the single biggest cash decision of the year, in either direction.

None of that is available from a mess.

Where we come in

Our cleanups run the six steps above with a diagnostic first and a fixed fee. Most finish in two to four weeks once we have access, and every one ends with the memo and a conversation about the monthly close that keeps it from happening again. If your books are giving you wrong answers and tax season is coming, reach out. We’ll start with the diagnostic and tell you exactly what you’re dealing with.