Quick Ways To Tell If Your Books Are Off
Accurate bookkeeping is the backbone of any healthy business. It doesn’t just help you file taxes or apply for loans—it informs every smart decision you make. But even if you’re keeping up with data entry and reconciliation, things can still go wrong. That’s why it’s crucial to recognize the signs your books are off, and fast.
Below are some quick ways to spot bookkeeping issues, how to investigate them, and what to do to get back on track.
Your Bank Balance Doesn’t Match Your Books
What It Means:
One of the simplest but most telling signs something is off is a mismatch between your book balance and your bank statement. This can be a result of duplicate entries, missed transactions, or improper reconciliations.
How to Check:
Compare your QuickBooks (or other accounting software) bank balance to your actual bank statement at least monthly. If they don't match, and you haven’t reconciled the account, that's your first red flag.
Fix It Fast:
Reconcile your accounts regularly and look for unreconciled or duplicate entries. Use bank feeds wisely but don’t rely on them blindly—review and categorize carefully.
Negative Balances Where They Shouldn’t Be
What It Means:
If your accounts receivable, inventory, or even a cash account shows a negative number, that’s a clear indicator of a data error. These accounts shouldn’t dip below zero in normal operations.
How to Check:
Run your balance sheet and look at accounts like AR, AP, and inventory. If anything looks unusual—such as a negative balance or a zero balance where there should be movement—that's a sign of trouble.
Fix It Fast:
Investigate entries posted to these accounts. For instance, a customer payment might have been recorded without a matching invoice, or an invoice could have been deleted after a payment was received.
Old Unpaid Invoices or Bills Still Showing Up
What It Means:
If you're seeing invoices or bills from six months ago that you know were paid, it's likely they were either not marked as paid or were duplicated.
How to Check:
Run an accounts receivable aging report and an accounts payable aging report. Any old or unpaid entries should be reviewed.
Fix It Fast:
Match payments to the correct invoices or bills. Check for accidental duplications or payments applied to the wrong vendors or customers.
Owner’s Equity or Retained Earnings Looks Off
What It Means:
Many business owners ignore equity accounts until tax time—but big changes or negative balances here could signal serious posting errors, like income or expenses recorded directly to equity.
How to Check:
Review your equity accounts. If retained earnings change mid-year or owner contributions/draws are inconsistent, it could mean something was miscategorized.
Fix It Fast:
Go through your general ledger and check for transactions coded to equity that should’ve gone elsewhere—especially income and expense items.
Reports Don’t Match Reality
What It Means:
If your profit and loss report shows you’re highly profitable, but your cash flow tells a different story, your books may be reflecting income and expenses incorrectly.
How to Check:
Compare your P&L to your cash flow. Is income being recorded before it’s actually received? Are expenses being recognized without payment?
Fix It Fast:
Double-check your accounting method (cash vs. accrual). Be sure invoices and bills are posted in the right period, and consider using accrual-based financials for better insights.
Strange Transactions in Uncategorized Accounts
What It Means:
Any transaction sitting in “Uncategorized Income” or “Uncategorized Expense” is a mystery waiting to be solved. These are holding buckets that often mean you (or your software) didn’t know where to put something.
How to Check:
Run a transaction report filtered by “Uncategorized” categories. If you see any activity, it means there are transactions that need classification.
Fix It Fast:
Investigate each entry. It might be a miscategorized deposit, a vendor payment without a proper account, or a personal expense that accidentally made it into the business books.
You’re Always Playing Catch-Up
What It Means:
If your bookkeeping feels like a never-ending game of catch-up, that usually means transactions are piling up—and errors are increasing.
How to Check:
Are you months behind on reconciliations? Struggling to find receipts? Unsure what your current profit is? These are all signs your books are falling behind.
Fix It Fast:
Set a regular schedule for bookkeeping. Weekly touchpoints can prevent a mountain of errors. Or better yet—consider hiring help to maintain consistency.
Don’t Wait for a Crisis to Fix Your Books
Your financials are the health report of your business. When the numbers are off, your decisions suffer—leading to cash flow issues, tax penalties, and lost opportunities. But you don’t need to be an expert to catch the early signs.
Quick reviews of your balance sheet, reports, and reconciliations can help you stay on top of your business and avoid disaster. If you find consistent problems, it may be time to upgrade your system or work with a bookkeeping professional.
Need help getting your books in shape?
A good accountant or bookkeeper doesn’t just fix mistakes—they help prevent them. Reach out for a free consultation and bring confidence back to your numbers.