How do I know if my bookkeeping is accurate?
The most reliable test is bank reconciliation. If your bank and credit card statements match what’s in your accounting software, you’ve established that money moving in and out was recorded correctly. That’s the foundation. If accounts haven’t been reconciled in months or the reconciliation shows unexplained differences, your books aren’t accurate.
Beyond reconciliation, look at your financial statements and ask whether they match reality. Does your reported cash balance actually reflect what’s in your accounts? If your books say you have $15,000 in the bank but you know you’re hovering around $8,000, something is wrong. Same with accounts receivable. Pull the list of unpaid invoices. Do you actually recognize those customers and amounts? Are invoices showing as outstanding that you know were paid weeks ago?
Check if recent transactions are categorized correctly. Pick a few purchases from the last month and look at how they were coded. Materials you bought for a job should be in materials expense, not office supplies. That dinner with a vendor shouldn’t be in the same category as your phone bill. Miscategorizations add up and distort your profit picture.
Compare current numbers to prior periods. If your revenue was $50,000 last month and it’s showing $8,000 this month but nothing actually changed that dramatically, there’s likely an error or transactions weren’t recorded. Consistent business bookkeeping should produce trends that match your sense of how the business is performing.
Margins are another reality check. If you’re a contractor and your books show 40% gross margin, does that match your experience? If you know you’re working hard and barely breaking even but the financials show healthy profits, the costs aren’t being captured correctly.
Check your payables list. Are there bills showing as unpaid that you already paid? Are there vendors missing entirely? A reliable accounts payable should reflect what you actually owe and to whom.
The intuitive test matters too. When you look at your financial statements, do you understand what they’re telling you? If the numbers surprise you or contradict what you know about the business, either your understanding is off or the books are wrong. Often it’s the books.
For most small business owners, accuracy comes from consistent processes. Monthly reconciliations, categorizing transactions as they happen, and reviewing the financials regularly. If that’s not happening, errors accumulate. You might not notice them until tax time or when you apply for financing and discover the numbers don’t add up.
If you’re uncertain, have someone qualified take a look. A full-service bookkeeper or accountant can review your books and identify issues you wouldn’t catch yourself. The cost of a review is small compared to the cost of making decisions based on bad data or getting surprised by a tax bill that doesn’t match your records.
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More Questions
What should I look for in a bookkeeping service?
Look for industry experience, clear communication, and a defined monthly process. Technology fit and pricing transparency matter too. The right bookkeeper understands how your business operates and delivers consistent, on-time financials.
Read answerHow much does a fractional CFO cost?
Fractional CFO fees typically range from $1,500 to $5,000 per month for ongoing work, or $150 to $400 per hour for projects. Cost depends on scope, complexity, and hours needed. Compare that to $200,000+ annually for a full-time CFO including benefits.
Read answerHow do I track equipment costs by job?
Track rented equipment by assigning invoices directly to jobs. For owned equipment, calculate an internal hourly rate based on depreciation and operating costs, then log usage and charge jobs accordingly.
Read answerCan a bookkeeper help me fix my messy QuickBooks file?
Yes, qualified bookkeepers can clean up messy QuickBooks files. They reconcile accounts, recategorize transactions, remove duplicates, and organize your chart of accounts so your financial reports are accurate and trustworthy.
Read answerShould I offer payment terms to customers?
It depends on your business type. Retail and consumer services typically collect at time of sale, but B2B services and contractors often need to offer terms to compete. The key is structuring them to protect your cash flow.
Read answerHow do I track inventory in QuickBooks?
QuickBooks can track inventory, but it requires proper setup and consistent processes. Enable inventory tracking, create inventory items with accurate costs, and maintain regular counts to keep your books accurate.
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