Many business owners hire a bookkeeper specifically because they do not want to become experts in bookkeeping. That can make it difficult to judge the quality of the work. The books may look organized on the screen while problems quietly accumulate underneath.

There are, however, practical signs that tell you whether your bookkeeping is being handled well.

1. Your Accounts Are Reconciled Regularly

Bank and credit-card reconciliations are fundamental. The balances in your bookkeeping system should be compared with the actual financial accounts so missing, duplicated or incorrectly recorded transactions can be identified.

If reconciliations are months behind, the financial reports built from those records may not be reliable.

2. Your Financial Reports Make Sense

Your profit-and-loss statement and balance sheet should not require you to simply trust that everything is right. Large unexplained balances, negative accounts that should not be negative, duplicate income or expenses in strange categories deserve investigation.

A good bookkeeper should be able to explain unusual items rather than merely produce the report.

3. Your Books Stay Current

Good bookkeeping is not very useful if it is perpetually several months behind. You should have a reasonable expectation of when each month’s work will be completed and when reports will be available.

If you routinely discover at tax time that half the year still needs to be entered or reconciled, the process is not working.

4. Your Bookkeeper Asks Questions

A bookkeeper who never asks a question is not necessarily a better bookkeeper. Some transactions cannot be categorized correctly without understanding what happened.

Questions about an unfamiliar vendor, a large purchase, a loan, owner activity or an unusual deposit can be evidence that someone is actually reviewing the books rather than blindly accepting automated suggestions.

5. You Know Who Is Responsible for Your Books

Business owners should know who to contact when they have a bookkeeping question. At Capacity, clients work with a dedicated bookkeeper who becomes familiar with the normal activity of the business.

That continuity matters. The more familiar someone is with your company, the easier it becomes to recognize when something does not look normal.

6. Your Bookkeeper Understands Your Industry

Some businesses have bookkeeping requirements that are easy to mishandle without industry experience. Construction companies, for example, may need job costing, subcontractor tracking, progress billing, retainage and proper allocation of labor and materials.

Nonprofits may need accurate tracking of grants, restricted funds, programs and other activity that differs from a typical for-profit business.

A bookkeeper does not need to know everything about your industry on day one, but the bookkeeping system needs to reflect how your business actually operates.

7. Problems Are Explained and Corrected

Mistakes happen. The more important question is what happens when one is discovered. A professional bookkeeping process should identify the issue, determine why it happened and correct it appropriately.

Repeated unexplained adjustments or balances that are simply forced to match should concern you.

Warning Signs Your Bookkeeping May Need Attention

• Bank or credit-card accounts have not been reconciled recently.
• You cannot get a current profit-and-loss statement or balance sheet.
• Your CPA repeatedly finds significant bookkeeping errors.
• Transactions accumulate in uncategorized or miscellaneous accounts.
• Loans, payroll or owner transactions regularly look wrong.
• Your bookkeeper cannot explain important balances.
• You do not know who is actually working on your books.
• Problems are repeatedly postponed until tax time.

What If You Suspect the Books Are Wrong?

You do not necessarily need to start over. The first step is determining what is actually wrong and how far back the problem goes.

If the records need correction, Capacity provides bookkeeping cleanup and catch-up services. Once the books are reliable again, an ongoing monthly process can keep them that way.