How To Catch Up Your Bookkeeping Before Year-End

Businesswoman feeling stressed while going through her finances

Feeling stressed about getting your books in order before tax season?

As an e-commerce business owner, it’s easy for your bookkeeping to fall by the wayside. Maybe you've been focused on growing your business, handling customer demands, or launching new products, and your bookkeeping has taken a back seat. But with year-end and tax season approaching, now is the perfect time to catch up and ensure your financial records are in top shape. Not only will this help you stay compliant, but it will also give you a clearer picture of your business's financial health.

You might have tried to tackle your bookkeeping in the past, only to feel overwhelmed or unsure where to start. I’m here to offer a fresh perspective on how to get your books caught up quickly and efficiently. Many business owners believe that catching up on months of bookkeeping is a daunting task, but breaking it down into manageable steps can make the process much easier. By the end of this post, you'll have a clear, actionable plan to tackle your bookkeeping backlog and keep it up-to-date moving forward, setting you up for a smooth, stress-free tax season.

What is Catch-Up Bookkeeping?

Catch-up bookkeeping involves bringing your financial records up-to-date when you've fallen behind. It’s about organizing and entering missed transactions, ensuring everything is accurately recorded, and your financial reports reflect the actual state of your business. For e-commerce businesses, this process is crucial, especially if you're using a platform like QuickBooks, which can streamline and automate much of the bookkeeping process.

When is the Best Time to Catch Up on Your Bookkeeping?

The best time to catch up on your bookkeeping is when you notice your records falling behind. Regularly reviewing and updating your financial records is essential to avoid accumulating a backlog that can become overwhelming. Ideally, you should address bookkeeping tasks monthly or quarterly to ensure accuracy and avoid last-minute scrambles. If you've neglected your bookkeeping for a while, it’s crucial to prioritize catching up as soon as possible. This will help you identify discrepancies, ensure accurate data for tax deductions, and maintain financial clarity throughout the year.

Our Routine for Catching Up on Bookkeeping

Having a routine can make the catch-up process more manageable. Here’s the routine I recommend when helping e-commerce clients get their books back on track:

  1. Sync in All Transactions: The first step is to update QuickBooks with all transactions from your bank, credit card, and merchant accounts since your last bookkeeping session. This process consolidates your financial data in one place, simplifying the tasks of categorizing and reconciling transactions later.

  2. Record Journal Entries: Next, you’ll need to record journal entries that summarize every income and expense line that makes up each bank deposit. In e-commerce bookkeeping, you can’t simply categorize the deposits into a single "Sales" account because each deposit typically includes various components that must be accurately recorded. For instance, each sale may include:

    • Product Sales: The revenue generated from the actual sale of goods.

    • Sales Tax Collected: Any sales tax collected from customers that you must remit to the appropriate tax authority.

    • Shipping Income or Fees: Revenue earned from shipping charges or fees paid to shipping carriers.

    • Discounts or Refunds: Any discounts offered to customers or refunds issued which reduce your gross sales.

    • Marketplace Fees: Fees deducted by platforms like Shopify, Amazon, or eBay before the funds are deposited into your account.

Because of these components, a single deposit may not represent just one type of transaction. Instead, it’s a combination of several income and expense elements. This is why creating a journal entry is crucial—it ensures that each component is properly allocated to the correct accounts.

How to Do It:
Create a journal entry in QuickBooks that breaks down each deposit into its components. For example, if your deposit includes product sales, sales tax collected, and marketplace fees, your journal entry should reflect:

  • Credit the Sales Account for the total amount of product sales.

  • Credit the Sales Tax Payable Account for the amount of sales tax collected.

  • Credit the Shipping Income for any shipping fees collected

  • Debit the Discounts/Refunds Account for any customer discounts or refunds.

  • Debit the Marketplace Fees Account for fees deducted by the platform.

  • Debit the Bank Account for the net deposit amount that actually appears in your bank statement.

To streamline this process and save time, we use A2X to map these entries from Shopify automatically. A2X integrates with Shopify to categorize and record these components accurately, simplifying the reconciliation process and ensuring that your financial records are precise and timely.

3. Categorize Transactions:  Properly categorizing transactions in your banking feed is crucial for maintaining accurate financial records. Here’s how to streamline this process:

  • Filter and Sort Transactions: Start by filtering your transactions based on their type—incoming or outgoing. Sorting these transactions by payee or vendor helps to handle similar transactions in bulk efficiently.

  • Handling Deposits:

    • Match to Journal Entries: For deposits, match them to the journal entries you previously created. This ensures that each deposit is accurately reflected in your books and reconciled with your bank statement.

    • Categorize to Clearing Account: If a deposit cannot be matched directly to a journal entry, categorize it to its respective clearing account based on who the deposit is coming from.

  • Handling Expenses:

    • Categorize to Proper Account: Ensure that all expenses are categorized to the appropriate expense account, such as "Office Supplies" or "Marketing Expenses."

    • Correct Vendor Name: To maintain accurate records, select the correct vendor name for each transaction. For example, if you paid for advertising, categorize the expense under "Advertising" and ensure the vendor’s name is listed as the entity you paid.

This process should be repeated for each bank or credit account linked to QuickBooks. Consistent categorization across all accounts ensures that your financial records are complete and accurate.

4. Reconcile Accounts: Reconcile QuickBooks to your bank, credit card, and merchant account statements to ensure everything matches and no transactions have been duplicated or missed. 

5. Review Accounts: After reconciliation, review your income and expense accounts for accuracy and ensure everything is categorized correctly. 

Note:  Personal expenses should be recorded in an equity account and not impact your income statement.

6. Record Payroll and Adjusting Entries: Don’t forget to record any payroll entries and adjusting entries necessary for your business. Adjusting entries might be needed for things like accrued expenses or depreciation. These entries ensure that your

7. Store Supporting Documentation: Finally, make sure you store all supporting documentation for each transaction. Bank statements alone aren’t enough—you’ll need receipts, invoices, sales data from your platform, payroll records, etc., to support your financial records.

How to Keep Up With Bookkeeping After Catching Up

Once you’ve caught up on your bookkeeping, it’s important to keep it up-to-date to avoid falling behind again. Here are some tips to maintain your books moving forward:

  • Set a Regular Schedule: Dedicate time each week to update your bookkeeping.

  • Automate Where Possible: Utilize QuickBooks' automation features to sync transactions and categorize them automatically.

  • Review Regularly: At the end of each month, review your financial statements to ensure accuracy.

Wrapping it Up

Always Remember: Start Small and Stay Consistent!

If you’re feeling overwhelmed by the amount of bookkeeping you need to catch up on, remember that it’s okay to start small. Ask yourself, why does catching up seem so overwhelming? Who benefits if I continue to put it off? The reality is getting started—no matter how small the steps—will give you peace of mind and help you regain control of your business finances.

For more guidance on staying organized and ready for tax season, download our Tax Readiness Guide.

If you're feeling unsure or pressed for time, consider our Tax Ready Transaction service. We'll get your books in order quickly and efficiently so you can focus on running your business.

I hope this post has been helpful! If you have any questions, comment below.

Disclaimer: The content on this blog is for informational purposes only and does not constitute professional financial advice. While I am an accountant and tax professional, the information here should not be relied upon without seeking advice from a professional tailored to your individual circumstances. I disclaim any liability for actions taken based on the content of this blog.

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