u/RobertOneBooks

When I was first started using QuickBooks for a catch up and clean up work I would see that the bank balance was matching the QuickBooks balance and i thought “ well that account looks complete”. To top it off the previous bookkeeper had reconciled the last 3 months. The owner just said to me - “something’s wrong - the numbers make no sense”.
I undid all the bank reconciliations and redid them. What I discovered was the bank was connected 3 months into a 2 year catch up and the opening balance was posted. The first 3 months revenue and expenses were masked by QBO plugging the balance with an entry to opening balance equity. I downloaded the 3 months coded them and gave tge owner corrected financial statements.

Many of us do catch up bookkeeping which may cover 1,2,3 or more years. How many bookkeepers try to get receipts to back up the transactions?

Our approach has been to get the accounts caught up and reconciled and then chase down the material items such as fixed asset purchases.

Curious how others approach it.

We have taken on work from a CPA (white label) who keeps the relationship with the client. It is a good steady addition to our monthly revenue but not having direct client contact and not owning the relationship has been a problem.
This firm can’t get their act together. Late paying us also. Hate to give up the income but it is a continuous chase if the CPA for answers. Should I try to help them figure out how to manage their client or cut them loose?

When I am doing QBO catch up bookkeeping or monthly bookkeeping I am always checking the bank register no status. It shows me what items are not resolved between quick books and the bank feeds. If the bank is reconciled no transactions should be open prior to the reconciliation date except for outstanding checks.

Baseball teams have a farm team. We now do also - college students.
We used to outsource to the Philippines. Now we only hire US sophomore and junior college accounting majors. The downside is most have no practical accounting experience or bookkeeping. The upside is they are reliable, hungry to learn and don’t say things like “ I wasn’t hired to do that”.
Our hiring criteria is good grades. Not 4.0 but really strong in accounting. We uses Handshake to post the job and we can screen through the app.

We require QBO level 1 certification within 30 days. Once they complete it we give them a raise. Then incentive then further. If the pass QBO level 2 we give them another raise.

As the owner/ managing partner I give them about 19 hours of training in how I want work to be processed. They are primarily responsible for coding of transactions and bank/credit card reconciliations.

This training is not only good for monthly bookkeeping but with catch up bookkeeping since those are the primary things that need to be done.

Each student reports to an account manager who is responsible for reviewing the accounts and producing monthly financials.

Real world example - I hired a sophomore college student from Georgetown. She stayed with me for 5 years and is the most experienced person on my staff. I lose her in about 3 months after graduation with an MBA. Hire early, train, mentor, compensate accordingly and you will have a skilled staff. It is my farm team approach.

I know if you click on the create + and go to bank deposits you can see the items included in un deposited funds. I don’t think there is an actual report that can be run from the reports menu unless I’m missing it.

We have limited time to maximize revenue and we don’t need constant pop ups. I do catch up bookkeeping and you are slowing me down. Enough!

In college we learned about the natural balance of accounts. Examples: assets = debit, liabilities = credit, income = credit, expenses = debit etc. why is this important? Well when you are doing a clean up and see a liability account with a debit balance ( not a contract account) such as a loan or credit card - red flag. In QBO you will see it as a negative on the balance sheet. I find my college students don’t have this concept in their skill bank. I quiz them on zoom call by pulling up a balance sheet and ask them to tell me what accounts look incorrect.

What other things should I teach them? I really enjoy other accounting professionals teaching tips.

Before excel and QuickBooks there was a 13 column green accounting pad. You would take a bank statement and list all the transactions by date amount and description and then spread them across. If you didn’t have enough columns you scotch tapes annoying to extend it. Foot and cross foot using a calculator.
The principle is the same only in excel you can download all the transactions and the spread them. The ability to sort by name or description accelerates the spreading. The foot and cross footing is done with sum function.
In QuickBooks the transactions port in and you code them (spread) to the respective accounts. No foot or cross footing needed. It is done within the software.

Nothing in principle has changed, only the tools.

What new tools do you see that will change the way we do bookkeeping?

In college we learned about the natural balance of accounts. Examples: assets = debit, liabilities = credit, income = credit, expenses = debit etc. why is this important? Well when you are doing a clean up and see a liability account with a debit balance ( not a contract account) such as a loan or credit card - red flag. In QBO you will see it as a negative on the balance sheet. I find my college students don’t have this concept in their skill bank. I quiz them on zoom call by pulling up a balance sheet and ask them to tell me what accounts look incorrect.

What other things should I teach them? I really enjoy other accounting professionals teaching tips.

There are differences and similarities between clean up bookkeeping and catch up bookkeeping. My experience in doing clean up bookkeeping is that you are usually working with a set of books for a given period that have a myriad of errors in both transaction omission and transaction categorization errors.  We start with the basics.  Reconciliation of the bank and credit card accounts.  Once we have them reconciled ( my stake in the ground) we move to the P&L.  Most likely we will have uncategorized income and expenses which need client clarification.  Many times we will discover loan payments, loan proceeds, owner draws, owner investments and fixed asset purchases improperly recorded.  Once reclassified we will look at the balance sheet and obtain the documents to record fixed asset purchases, and loan statements to true up loans and interest expense.  Clean ups are more difficult in that you are dealing with the work of others.
 
With catch up work, you are mainly starting with a clean slate or with a previous tax return as an anchor.  Much of the same work needs to be done with the except it is your original work and rather than reclassification it is classification.  Gathering information from the client upfront such as how many bank and credit cards do you have, do you have any loans currently or during the catch up period, have you made any fixed asset purchases due the clean up period etc will cut down on the back and forth with the client.
 
The primary difference is that in clean up you are correcting someone else’s mistakes and in catch up you are doing original work correctly.
 
What is your experience in clean up vs catch up bookkeeping?

I am using college students now, replacing off shore assistance. Partly for marketing purposes because I want to build trust and partly as a give back. When I got out of college I was so green that I didn’t understand how to read a financial statement. I had a great mentor who explained fundamentals that we never really covered in classroom learning. Things like natural balances of accounts. How an entry only had a P&L impact if it crossed from the balance sheet accounts to the P&L accounts. One of the most interesting points was when we went to a warehouse and he asked me what I was looking at. I said inventory. He said “no - you are looking at where all the cash is”. So while learning Journal entries and coding transactions- take the time to explain what it means.

One of the hardest parts of catch-up / cleanup bookkeeping isn’t the bookkeeping itself…
It’s client responsiveness after the engagement starts.

Example:
You agree on a fixed cleanup price based on what you can see initially. Client pays a deposit. You start digging in.
Then you find:
Loan payments with no loan statements
Large deposits with no explanation
Transfers between unknown accounts
Payroll withdrawals with no payroll reports
Owner contributions vs loan proceeds that can’t be identified
Old uncategorized transactions going back years
You send questions.
Days go by.
Then weeks.

Now the project stalls, your team keeps revisiting the same file, and the margin on the cleanup starts disappearing because of the constant follow-up and rework.

How are other firms handling this?
Do you:
Put limits in the proposal for unanswered questions?
Bill hourly once delays start?
Pause work after a certain number of days?
Require documents up front before starting?
Use uncategorized equity/income accounts and move on?
Curious how others protect themselves from scope creep on cleanup work while still keeping clients happy.