I'm a Small Business Owner and My Books Are a Mess. What Do I Do?

It usually starts with an event—something that shakes up your routine and leaves you feeling overwhelmed. Maybe your bookkeeper left, your business took off faster than expected, or you got a dreaded letter from the IRS. You thought you could handle things on your own, but now you realize it’s not as easy as it seemed. Whatever the trigger, you’re now facing a financial mess and aren’t sure how to untangle it.

Recognizing the Signs of a Messy Accounting System

These situations are more common than you think, and many business owners find themselves in similar predicaments. Here are some telltale signs that your accounting system is in disarray.

Unpaid Bills and Unknown Liabilities

You’re unsure who you owe money to and what payments are due. Maybe you’re missing deadlines, incurring late fees, or even facing service interruptions because bills haven’t been paid on time.

Commingling of Personal and Business Expenses

Your personal and business expenses are mixed together, making it hard to track where your money is really going.

This not only complicates your bookkeeping but can also lead to issues with tax filings and audits.

Outdated or Incomplete Tax Returns

Your tax returns are either late, incomplete, or you’re worried about their accuracy. 
Perhaps you haven’t filed because you don’t have a clear picture of your financial situation, or you’re missing critical documentation.

Lack of Organized Financial Documentation

You don’t have a reliable system for keeping track of receipts, bills, and other important documents.

Your receipts might be piled in a drawer or scattered across different locations, making it a nightmare to gather everything when you need it.

If any of these sound familiar, it’s time to take action. 

And the good news is that it’s never too late to get organized.

The First Steps to Clean Up Your Books

The first step in getting your books back in order is to stop the bleeding. This means creating clear boundaries between your personal and business finances. If you’ve been mixing the two, it’s time to separate them. 

Set up distinct bank accounts for your business and personal expenses and commit to using them consistently. If your business account doesn’t have enough funds, transfer money from your personal account before making any payments. This simple step will prevent a lot of future headaches and help you regain control over your finances.

Once you’ve established this separation, it’s time to start gathering and organizing your financial documents. It doesn’t matter if you prefer digital tools or old-school paper methods—what matters is that you choose a system that works for you and stick with it.

For those who are comfortable with digital tools, apps like Dext can be incredibly helpful. Dext allows you to easily capture and organize receipts and invoices, and at Patrick Accounting, we offer our clients access to this app as part of our service. If you prefer a simpler approach, using cloud storage like Google Drive or Apple Cloud to create a folder structure by month can also be effective.

Establishing a Simple and Effective System

Once you’ve started organizing your documents, it’s time to refine your system. At Patrick Accounting, we recommend focusing on consistency. A consistent system reduces errors and makes it easier to keep your books up to date.

Don’t worry about categorizing every single expense immediately—start by simply getting everything in one place. Once you’ve got all your documents organized, you can begin setting up a straightforward categorization system:

• Monthly Folders: Create folders for each month of the year (e.g., January 2024, February 2024). Within these folders, you can store subfolders for Bank Statements, Receipts, etc.
• Unpaid Bills: Keep a separate folder for unpaid bills, and move them to the appropriate monthly folder once they’re paid.
• Major Transactions: Leases, loans, and significant purchases should have their own dedicated folders. This way, you always know where to find critical documents.
• Receipt Management: If you’re using QuickBooks, take advantage of the receipt management feature. Attach receipts directly to transactions within the software to streamline your bookkeeping process.

However, even with tools like QuickBooks, the foundation of a good system is having all your documents neatly organized. The key here is to keep everything consistent and easy to access.

For example, instead of creating a new folder for every vendor, it’s simpler to categorize documents by month and type of transaction. This way, you avoid having a sprawling file structure that’s hard to navigate.

When to Bring in an Accountant

You might be wondering, "When is the right time to bring in an accountant?" The answer is often sooner than you think. If you’re spending more time stressing over your books than you are growing your business, it’s time to get help.

An accountant can do more than just clean up your current mess—they can help you set up a system that works long-term. At Patrick Accounting, we start by assessing the current state of your books. We’ll look at your bank accounts, credit cards, and any other financial tools you’re using to see where things stand.

Our assessment will often begin with questions like:

1. How many bank accounts do you have?
2. What’s the current state of your bookkeeping system?
3. Are you using QuickBooks or another accounting software?

Most of our clients are already using QuickBooks, but it’s not uncommon for them to feel overwhelmed by the software. 

Remember, you’re a business owner, not an accountant, and it’s okay to need help with something that isn’t your area of expertise.

Once we’ve assessed the situation, we’ll create a plan for organizing and reconciling your accounts. This process includes:

• Reviewing and reconciling all bank and credit card statements
• Identifying any missing or incorrect transactions
• Setting up a consistent categorization system for all your expenses

We’ll make sure all your financial records are accurate and up to date, so you can rely on them to make informed business decisions. 

Maintaining Your Books for Long-Term Success

Once your books are cleaned up, the key to long-term success is consistency. By sticking to the system you’ve established, you’ll be able to keep your finances organized and make better business decisions.

Remember, your financial records aren’t just numbers on a page—they’re the story of your business. Keeping that story straight will help you understand where you’ve been and, more importantly, where you’re going.

And if you ever find yourself slipping back into old habits, don’t hesitate to reach out for help. At Patrick Accounting, we’re here to simplify your financial complexities so that your business has the foundation it needs to thrive and you have the financial clarity you need to make informed decisions.

We’ll also work with you to develop a plan for maintaining your books going forward. This includes regular reconciliations, financial reporting, and ongoing support so that your books stay in order. Our goal is to give you the financial clarity you need to make informed decisions and drive your business forward.