You’ve just finished a client’s books for the year when suddenly the tax return is filed, and everything seems in order. Then the CPA comes back with a list of journal entries and points out that prior years’ data is all wrong. Sound familiar? You’re not alone. Many bookkeepers face this situation because messy books are more common than you’d think. And often, the problem started with well-meaning clients making changes they shouldn’t.
Cleaning up these kinds of mistakes is a high-demand service, especially since many business owners don’t realize there’s an issue until their CPA says, “This needs fixing,” or their bank rejects financial statements. But as a bookkeeper, your role goes beyond just cleaning up the mess when suddenly you need to help prevent it from happening in the first place.
This guide will show you how to spot bookkeeping red flags, like issues hiding in the balance sheet, and give you the tools to address common client-created disasters. One step at a time, you’ll build the confidence to tackle these challenges head-on.
Picture this: you’re working diligently on a year-end close for a client who filed an extension. Suddenly, you discover a brand-new, duplicate version of their QuickBooks file. When you ask the client, they casually mention that a sync error occurred six weeks ago, and they thought opening a new file was the solution. Now you have two databases when suddenly one with your corrections and another with six weeks of the client's new transactions.
What went wrong here? The client likely left their database open for days, preventing it from syncing correctly. When they encountered an error, they created a new file without telling you. Now, you have to sort out the discrepancies and merge the work.
In these situations, communication is key. The moment a client suspects something is wrong with their database, it should be treated as an emergency. They need to contact you immediately. Because the client didn't reach out, they are responsible for the extra time it takes to redo the work. Your role is to explain this calmly and professionally, emphasizing the need for immediate communication in the future.
One of the most critical responsibilities of a bookkeeper is to protect retained earnings. Retained earnings represent the accumulated net income of the company over time, minus any dividends paid out. It’s a historical record of the company's profitability. When this number is messed with, the financial story becomes inaccurate.
Many well-meaning bookkeepers and even controllers make mistakes here. For example, clearing out an "Opening Balance Equity" account is often necessary, but putting the adjustment against retained earnings is usually wrong. This method is only appropriate when setting up a brand-new database from historical balances. In an active database, items in Opening Balance Equity are typically errors that need to be traced back to their source and corrected properly.
Make it your mission to understand what retained earnings truly represents and guard it fiercely. Any changes to it should be deliberate, understood, and well-documented.
Here’s another scenario. A CPA makes an adjusting journal entry to accounts receivable (A/R) for a tax filing. At the same time, the client is "cleaning up" old invoices by voiding, deleting, and changing them. Now, you have competing adjustments, and the A/R balance is a mess.
To solve this puzzle, you need to dig into the details.
- Check the dates: Are the CPA's adjustments and the client's changes for the same period? Maybe, but maybe not. A client might be altering invoices from one prior year, while the CPA's entry is for a different prior year.
- Investigate the offset account: When the CPA adjusted A/R, what was the other side of the entry? If the offset was to retained earnings, it’s a major clue. An adjusting entry to A/R that hits retained earnings tells you that the client has changed prior year data before. This most likely isn't a one-time mistake; it's a chronic issue.
The solution involves several steps. First, you'll need to add back an adjustment to restore the A/R balance to what it was before the client made changes. Then, you can apply the CPA's adjusting entries. Most importantly, you must train the client to stop changing past periods. End of story.
If a client needs to clear old, uncollectible invoices, they should use credit memos to offset them in the current period. Deleting or voiding past transactions creates chaos and undermines the integrity of the financial records.
Fixing messy books is one thing, but preventing the mess from reoccurring is where you provide immense value. Here's how you can be proactive:
Most business owners have no idea about accounting rules or the legal ramifications of their decisions. It’s up to you to educate them.
- Bank Feeds: Teach clients that bank feeds are a tool, not a requirement. They should only be used if they genuinely help. Review their bank feed rules, as poorly configured rules can re-populate transactions you’ve just voided or corrected.
- Invoices: Explain that invoices are legal documents and shouldn't be changed after being sent. For tiny discrepancies, like a 3-cent overpayment, adding a line item to adjust the invoice is practical. But for anything more significant, a proper credit memo is the way to go.
- Lock the File: Make sure the file is locked after a period closes so no one can inadvertently change the past.
As a bookkeeper, you are more than just a data entry person. You need to know enough about labor laws and accounting principles to spot potential issues. If a client wants to hire a "contractor" but then asks you to order them a uniform and a company phone, you need to step in and say, "Whoa, that's not how it works." Your role is to advise and protect the business owner from costly mistakes. Don't blindly follow instructions. Ask "why" and do your own research.
No one expects you to remember every detail of a cleanup project. Keep meticulous notes and take screenshots of reports before you start. The audit trail in QuickBooks is your friend when it time-stamps every entry. If a client questions a change, you can go back to your records and show what happened and when. Good documentation protects you and provides clarity for everyone involved.
Sometimes, the most effective cleanup is starting from scratch with a new database. This is a service you can offer your clients. A new file allows you to set up a clean chart of accounts and establish correct opening balances from the get-go.
However, be clear with the client about the limitations. For instance, if you enter outstanding accounts receivable as a lump sum opening balance, they won't have individual invoices in the new system. If they later need to apply finance charges to specific invoices, they won't be able to without re-entering them one by one. These are important conversations to have upfront to manage expectations.
Cleaning up a client's books requires detective work, patience, and a solid understanding of accounting principles. It's a skill that's in huge demand, and mastering it will make you an invaluable asset to any business. By taking it one problem at a time, training your clients, and protecting the integrity of the financial data, you can turn chaos into clarity.
Ready to elevate your skills?
Our Clean-Up Series is here to help you become the expert clients rely on for even the messiest books. With step-by-step guidance, you'll gain the confidence to handle any cleanup project.
Enroll today and transform chaos into clarity.
