Being behind on the books is the most common reason people call us, and the most common reason they wait too long to call. The file feels like a mountain. The good news is that catch-up work is more predictable than it looks, once you follow an order.
Here is how we approach it, whether you are doing it yourself or handing it to someone.
Step one: find the last good month
Work backward until you find the last month where every bank and credit card account was reconciled and the balances made sense. That is your starting point. Everything after it needs to be entered and reconciled. Everything before it can usually be left alone, as long as your CPA agrees.
If no month was ever truly reconciled, choose the start of the oldest open tax year and talk to your CPA about treating the opening balances as a clean start.
Step two: gather everything for the period
- Bank, credit card and loan statements for every month.
- Payroll reports from your provider.
- Sales, giving or donor system exports.
- Bills and invoices you can find. Do not wait for perfection; statements fill most gaps.
Step three: enter, then reconcile, one month at a time
Import or enter transactions for the oldest month, categorize them, then reconcile that month before moving on. Reconciling month by month catches errors while they are small. Entering a year of transactions and reconciling at the end turns one small mistake into a two-day hunt.
Keep a running list of unknowns: deposits you cannot identify, vendors you do not recognize. Ask about them in one batch rather than one at a time.
Step four: fix the balance sheet
Once the months are reconciled, read the balance sheet. Loan balances should match lender statements. Payroll liabilities should clear to zero after each payroll. Undeposited funds should match what was actually in transit. Anything that does not tie out gets a documented correction.
Step five: lock it and start the monthly habit
Set a closing date so the caught-up periods stop moving, hand your CPA a summary of what changed, and start the monthly close the very next month. Catch-up is only worth doing once.
