How to Reconstruct Financial Records from the Ground Up
I recently took on the role of controller at a small company, only to find that the financial records are essentially nonexistent. As part of my strategy to get things back on track, I have started by setting up a new QuickBooks Desktop account.
My initial plan is to begin by reconciling bank statements starting from February 2023. I would greatly appreciate any advice or tips on how to effectively tackle this challenge.
Thank you!
One response
Starting the Accounting books from scratch is a challenging yet rewarding task. Here’s a comprehensive guide on how to approach this project, especially with a focus on your QuickBooks Desktop setup and going back two years:
Step-by-Step Guide to Starting Books from Scratch
1. Define Your Starting Point
Determine if February 2023 is the point you want to start from or if you need additional historical data. This could depend on tax obligations, management requirements, or investor needs.
2. Gather All Financial Documentation
Collect all relevant financial documents and records from February 2023 or earlier:
– Bank statements
– Credit card statements
– Previous Accounting system data, if available
– Invoices (both issued and paid)
– Bills (both received and paid)
– Payroll records
– Tax returns (if filed)
3. Organize the Documents
Sort the documents by date and category. You might organize them using physical folders or digital systems. Ensure that you have a comprehensive and accessible filing system.
4. Set Up QuickBooks Desktop
Since you have already set up a new QuickBooks Desktop account, ensure you:
– Customize your company profile with the correct fiscal year, industry, and contact information.
– Set up the chart of accounts according to business requirements. This includes all asset, liability, equity, income, and expense accounts.
5. Backdate Transactions
Start entering historical transactions from February 2023. Begin with the balance sheet accounts:
– Cash/Bank Accounts: Enter opening balances for each period using bank reconciliation.
– Accounts Receivable and Payable: Record outstanding invoices and bills.
6. Reconcile Bank Accounts
Perform bank reconciliations for each month chronologically starting from February 2023:
– Enter all bank transactions (deposits, withdrawals, transfers).
– Match transactions in QuickBooks with the bank statements.
– Investigate and resolve any discrepancies.
7. Record Business Transactions
Chronologically enter the remaining transactions:
– Record sales and revenue, match them with bank deposits.
– Enter all vendor purchases and expenses.
– Record payroll and other operational transactions.
8. Review Monthly Financial Statements
After entering and reconciling each month’s transactions, generate the standard financial statements:
– Balance Sheet
– Profit & Loss Statement
– Cash Flow Statement
Analyze these statements for any irregularities or issues. This exercise ensures the accuracy of your