Behind on your books? How to catch up before tax time
Falling behind on the books is common and it is fixable. The trouble is that a pile of months looks like one enormous job. It is not: it is the same small job repeated in the right order.
Start by gathering, not entering
Before touching any software, collect everything for the period you are catching up:
- statements for every bank and credit-card account, including any you closed,
- payroll reports and, if you have contractors, a record of what each was paid,
- invoices you issued and bills you received,
- loan statements, and any tax notices or filings for the period.
A missing statement is the single most common reason a catch-up stalls. Ask the bank for it on day one.
Work from the oldest month forward
Reconcile the oldest unreconciled month first, so that each month’s opening balance is the previous month’s closing balance and any error shows up where it happens rather than months later. Then move to the next month, and the next.
Resist the urge to start with the most recent month because it feels most urgent. Starting at the end means you will redo it when an earlier error turns up.
Categorise, then clear the leftovers
Once a month reconciles, give every transaction a category. Your software can suggest categories from past entries, but check them: the same payee can be a business expense one month and a personal withdrawal the next.
Then clear anything left in an “uncategorized” or “ask my accountant” account. That account is where an incomplete set of books hides, and a tax preparer will not be able to use the file until it is empty.
Check the result against reality
When the months are done, read the profit and loss statement and the balance sheet and ask whether they describe the business you know:
- Does revenue match what you believe you earned?
- Does the cash balance equal what the bank says today?
- Are payroll and contractor totals consistent with the filings and forms?
A number that looks wrong usually points at a missing deposit or a transaction entered twice. Find it before you hand the file to anyone.
How long to keep it, and when to hand it over
The IRS generally says to keep records that support a return for at least three years from the date you filed it, and longer in some cases. Keep statements, invoices and receipts with the books they support.
Catching up yourself is realistic for a few months of a simple business. When it is a year or more, when several accounts are involved, or when the deadline is close, it is usually cheaper to hand it to someone who does it every day. We scope catch-up work after seeing the records and quote it separately from monthly bookkeeping.
This guide is general information, not legal, tax or accounting advice, and it does not create a professional relationship. Clear Filings is an independent service provider and is not affiliated with or endorsed by any government agency. Speak to a qualified adviser about your own circumstances.
Common questions
How far back do I need to catch up?
At least to the start of the tax year you have not yet filed, and further if returns or payroll filings for earlier periods depended on records that were never reconciled. A tax preparer can tell you which periods matter for your situation.
What if I have lost statements?
Ask the bank or card issuer to reissue them; most keep several years online. If a document is gone entirely, the bank's own transaction history is usually enough to reconcile, though you will lack the supporting detail.
Do late books mean I owe a penalty?
Penalties relate to late returns and late payments, not to the books themselves. But late books are what cause late returns, which is why catching up before a deadline matters.
How much does catch-up bookkeeping cost?
It depends on how many months, how many accounts and the state of the records, so we quote it after seeing them. You see the figure before any work starts.
Let us do the catch-up
Send us what you have and we will tell you how far behind the books are and what it would take to fix. One clear figure before any work starts, and no payment taken on this site.
Request a bookkeeping quote