Catch-Up bookkeeping: What is it and how does it work?

As your small business grows, so too do your responsibilities. It can be increasingly difficult to devote time to these obligations as your business is on the rise, with tasks like bookkeeping often falling by the wayside.

Maintaining accurate and up-to-date financial records is vital to a healthy small business. Without them, it's difficult to pinpoint your business's financial health and has you making critical decisions in the dark. This slows the growth and momentum you worked so hard to achieve.

If you've fallen behind and want to learn how to clean up messy bookkeeping, don't worry. Catch-up bookkeeping is your lifeline. In this guide, we'll dive into how to catch up on bookkeeping for your small business. Specifically, we'll cover what catch-up bookkeeping is, why it's crucial for small businesses struggling to manage their books, and step-by-step instructions on how to get current and stay that way. 

What is catch-up bookkeeping?

Catch-up bookkeeping is sometimes referred to as bookkeeping clean-up, bookkeeping catch-up, clean-up bookkeeping, and catch-up accounting. Whichever name you prefer, they mean the same thing.

Catch-up bookkeeping services involve reviewing, updating, and organizing your small business's financial records. The immediate benefits of this practice lie in a better understanding of your business's financial health while gaining the ability to make vital data-backed decisions that will impact your business for years to come. Accurate, up-to-date bookkeeping also makes identifying growth opportunities easier, isolating areas of your business that need improvement, and minimizing your annual tax burden.  

The circumstances of why you might have fallen behind don't matter for catch-up bookkeeping to take effect. There may have been a project crunch, or you were stuck in an employee training loop or endless, exhausting meetings. Whether your books are behind by months or years, catch-up bookkeeping is the solution you need to move forward.

Why is catch-up bookkeeping important?

When you neglect your books, you lose perspective on your business's financial health, which costs you your ability to compete effectively. But there are other consequences, including financial penalties and increased IRS scrutiny, to grapple with. Catch-up bookkeeping keeps more money in your pocket by ending these snowballing issues.

And the benefits don't stop there. Catch-up bookkeeping puts you in control of your finances, makes it much easier to prepare quarterly estimated taxes and year-end returns, and optimizes your small business cash flow. 

Out-of-date books are good for only one constituency: your competition. 

Steps to implement catch-up bookkeeping for your business

There are steps you can take if you prefer to catch your books up yourself. This bookkeeping cleanup checklist will show you how to fix bad bookkeeping. 

1. Evaluate your current financial situation

You must evaluate your small business's financial status as you prepare to catch your books up. Focus on regularly reviewing credit card and bank statements, looking for irregularities, and scanning for other activities that might be out of the norm. 

You'll do this to ensure you pay the correct amount each month by avoiding duplicate payments, eliminating unused subscriptions and ongoing fees, and sidestepping fraud. Keeping up with your financial situation will save you time and money in the long term and help avoid the need for catch-up bookkeeping in the future!

2. Organize and categorize past financial data

Once you understand your financial status, you must organize and categorize that data. Focus on organizing receipts and invoices where you can access them when needed. Using accounting software, such as 1-800Accountant's ClientBooks, is among the quickest and most secure methods of categorizing and storing your data.

An important part of this step is not only categorizing your financial data but putting protocols in place centered around review and authorization. This way, you can catch mistakes before they become catastrophic errors.

3. Reconcile financial records with bank statements 

You will want to ensure that the data you've organized is accurate. Do this by checking your work against your bank statements. This ensures your transactions are correct and allows you to catch any mistakes that may have been made in previous steps. 

The faster you're able to identify issues and discrepancies, the better. This step can also help you establish access to cash reserves and critical protocols focusing on your small business's payment authorization system. 

4. Adjusting financial reports

Before your books are fully caught up, you must make necessary adjustments to your financial reports. This could be an involved process or as simple as separating business and personal accounts.

You will also want to adjust reports detailing payments to contractors and full-time employees. Some common forms you need to detail on these reports include W-2, W-9, and 1099. The forms you'll use will depend on the employment status of the professionals you're compensating.   

5. Implement a system to avoid future bookkeeping backlog

Falling behind on your books is no fun, so you'll want to avoid it in the future. Do this by setting aside time to update your books at least once a week. A little bookkeeping each week can save you from a lot of pain later on.

You'll also want to save time by automating this process as much as possible. This works wonders in capturing receipts and other data that used to be implemented manually. You should also adhere to the practices and protocols you've created in the previous steps to ensure your books are always current. 

The role of a professional in catch-up bookkeeping

Catch-up bookkeeping aims to ensure your small business's books are current and error-free. While doing it yourself is straightforward on paper, it can be much more complicated in practice. Many small business owners will hire an expert to address their bookkeeping issues.

When you hire a professional to catch you up, they'll take over and handle your books for you. Just provide access to your financial information, and they'll begin the time-consuming process detailed above. Your books will be caught up, and other money-saving deductions may be identified, adding to your overall savings.

If you have the budget, hiring a professional to catch your books up provides excellent value and peace of mind. 

How much does catch-up bookkeeping cost?

Catch-up bookkeeping prices and fees can vary. You might be charged an hourly, monthly, or flat fee for these services. Depending on how far back they'll have to go, you could budget for as little as a few hundred dollars into the thousands to complete the job. It depends on your needs and the severity of the situation. 

While pricing is undoubtedly important, you shouldn't choose based on pricing alone. Research their qualifications, read reviews, and talk to other small business owners who have used professional services for their catch-up bookkeeping needs.

Affordability is important, but you'll do more harm than good if you hire a person or company who lacks the necessary qualifications to update your books. 

1-800Accountant catches you up and keeps you ahead. 

Without a solid foundation, your house will eventually fall. The same can happen to your small business without a strong financial foundation. That's why it's important to take control of your finances immediately by getting help with bookkeeping.

Catching your books up yourself can be intimidating and set you back further if you hire the wrong professional or company. That's why many owners and entrepreneurs trust the experts at 1-800Accountant, America's leading virtual accounting firm for small businesses, for catch-up bookkeeping. 

Our catch-up bookkeeping service is affordable and error-free, giving you peace of mind and more time to devote to your business. In addition to that, we also offer small business taxes, tax advisory, educational content, and more to help you stay ahead. Our professional accounting solutions support your business operations at a price that works for you. Schedule a quick consultation – usually 30 minutes or less – to learn how we can help.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.