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- The first thing you want to do is gather your tax documents. This is critical because we need to know exactly what the IRS has on file for your business. Look for forms like 1099s, 1099-Ks, and any other filings. Collect all the yearly forms for every year you’re behind—this gives us a clear starting point.
- Next, gather your bank statements. If there are multiple years and you can’t access them online, go to your bank and request copies. Bank statements are essential because they show the actual money flowing in and out of your accounts.
- Number three: credit card statements. Any money spent on the business—whether from a business card or personal card—needs to be accounted for. Collect all statements so we can capture every transaction.
- Number four: invoices. If you’ve been using a separate invoicing system, even without full accounting software, gather all invoices. Every sale matters because we need to record the income properly.
- Number five: receipts. Collect all receipts for business expenses—cash, checks, or credit card purchases. Accurate expense tracking ensures we don’t miss anything that could reduce your taxable income.
- Number six: payroll records. If you’ve paid employees or contractors, gather all relevant forms. For contractors, that includes 1099s; for employees, that includes W-2s, W-3s, 940 filings, state payroll filings, and proof of tax payments. Complete payroll documentation is critical.
- Number seven: loan documents. Include vehicle loans, SBA loans, or any other business loans. This helps track balances, interest paid, and ensures the books reflect all liabilities.
Once you’ve gathered all documents, the next step is to categorize transactions. Pull all transactions from your bank statements, credit card statements, invoices, receipts, and loan documents. Then enter them into your accounting software. Each business has a unique chart of accounts, so make sure yours accurately reflects your income, expenses, assets, and liabilities.
Categorize expenses carefully. Assign every expense to the correct category—if you’re unsure, consult a professional. Next, categorize income using your invoices and IRS 1099s. Remember, even if you didn’t receive a 1099, all income must still be reported.
Reconciliation. This means matching all transactions in your software to your bank, credit card, and loan statements. Reconciliation ensures every transaction is accounted for and that your balances match reality. Any discrepancies must be investigated and corrected, including cash transactions or other items not captured in statements.
So, to summarize the three main steps for catching up multi-year bookkeeping:
- Gather and organize all financial documents – tax forms, bank statements, credit cards, invoices, receipts, payroll records, and loan documents.
- Categorize all transactions in your accounting software using a proper chart of accounts.
- Reconcile bank, credit card, and loan accounts to ensure everything is accurate and complete.
Once these steps are completed for every month and every year, you’ll have a much clearer picture of your business’s financial health. Keep in mind, the profit and loss or balance sheet may still need review to ensure accuracy. If you’re unsure, always reach out to a professional. Filing incorrect information with the IRS can create serious problems.