If you’re here, chances are your accounting software—whether it’s QuickBooks or Xero—is a bit of a mess. Maybe the accounts don’t make sense, maybe you’re seeing negative balances where you shouldn’t, or maybe things are just… off. You’re not alone.
At Akif CPA, we regularly help business owners, bookkeepers, and even other accountants clean up their books. And over time, we’ve developed an internal checklist we follow to ensure we approach every cleanup job with accuracy, structure, and efficiency.
Let’s walk through that process together.
Why Accounting Cleanup Matters
Cleanup isn’t just about aesthetics. It’s a technical, one-time project designed to restore the health of your financial data. Without clean books:
- You risk overpaying taxes
- Your reports won’t support loans or investments
- You can’t trust your numbers to make sound business decisions
We see it all the time—clients hand us their files and say, “Fix my QuickBooks.” But what does that really mean? The first step is figuring out what needs to be fixed, and how.
Step 1: Initial Review and Summary Comparison
Before touching anything, we gather:
- Access to QuickBooks/Xero
- Recent tax returns
- Year-over-year Profit & Loss and Balance Sheet reports
We do this to:
- Compare reported financials against what was filed with the IRS
- Identify discrepancies
- See which accounts are out of line or don’t reconcile
- Flag suspicious positive or negative balances
This high-level comparison forms the foundation for our cleanup process.
Step 2: Deep Dive into Each Account
Once we’ve assessed the overall condition, we dig into the Balance Sheet, starting with:
1. Bank Accounts
- Are there large negative balances?
- Are reconciliations up to date?
- Are there many uncleared transactions?
The bank is the heartbeat of your accounting system. If it’s off, everything else likely is too.
2. Inventory and Accounts Receivable
- Is inventory negative? That’s a red flag.
- Are there uncollected invoices?
- Are receivables incorrectly showing negative values?
3. Undeposited Funds
Only appears when invoicing is done through the software. If you see large balances here, it could point to missing deposits or duplicated entries.
4. Fixed Assets
- Were asset purchases and sales recorded correctly?
- Has depreciation been applied?
- Does the book value match the tax return?
5. Investments
Check original documents to confirm structure and value.
Step 3: Review Liabilities
1. Accounts Payable
- Are vendor bills entered and categorized correctly?
- Are negative balances showing?
2. Payroll Liabilities
This one’s big. We look at:
- 941 forms
- State payroll reports
- Payroll summaries
If liabilities are off, it may mean you’ve misreported wages or overpaid/underpaid taxes—potentially triggering IRS issues or inflating your profits.
3. Loans and Long-Term Liabilities
We often see lump sum payments (principal + interest) misclassified. This not only distorts your loan balances but can also result in missed interest deductions—which means higher taxable income.
Step 4: Equity Review
How equity is recorded depends on your entity type (Sole Prop, Partnership, S-Corp). It’s essential to know:
- Who contributed capital?
- How distributions were recorded?
While we won’t dive deep here, just know this part is crucial and often misunderstood.
Step 5: Profit & Loss Cleanup
1. Income
- Are all sales properly recorded?
- Is sales tax excluded from revenue?
2. Expenses
This section is usually easier for clients to understand. However, we still look for:
- Misclassified expenses
- Personal charges
- Duplicated entries
Post-Cleanup Tasks and Final Thoughts
After cleanup, we go back to review:
- Financial reports
- Outstanding questions
- Any unusual patterns that need clarification
Cleanup isn’t just about accuracy—it’s about creating useful financial data. And useful data leads to strategic tax planning, which leads to tax savings and better financial decisions.
Final Word
A thorough QuickBooks or Xero cleanup is no small task. It requires time, experience, and a deep understanding of accounting. Unfortunately, we’ve seen many well-meaning bookkeepers and even accountants make critical mistakes simply because they don’t understand how everything connects.
At Akif CPA, we specialize in one-time cleanup jobs that restore confidence in your books—and your business. Whether it’s for compliance, funding, or just peace of mind, we’re here to help.
đź“© Need help? Contact us at info@akifcpa.com
Clean books = tax savings = more money in your pocket.
Let’s get your books back on track
