Are your books a mess?
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What does cleanup mean in accounting?
Accounting processes are the foundation of all business planning and fraud prevention – their importance cannot be understated. Although CPAs will step in to help with some year-end accruals and cleanup, they typically perform the minimum amount of work required to achieve tax compliance. True accounting cleanup means:
- Reconciled cash and cash accounts. This should be done once a month to match bank records.
- Capitalized fixed assets. Don’t ever estimate the worth of your assets. Create a schedule to depreciate them appropriately.
- Verified inventory values. If you hold inventory, a monthly count should be performed and costed to determine an accurate value for your inventory asset.
- Other assets fully accounted. All assets’ balances should vary over time and be positive.
- Reconciled liabilities. Credit cards, loans and other short term liabilities effect cash. Again, these balances should vary over time and match any statements from the lender.
- Accurate equity balances. Often overlooked, the equity section must be accurate to avoid partner disputes or M&A problems.