Before you use a profit figure for a decision, such as a loan application, an estimated payment or an owner draw, check the file behind it.
1. Check the report settings
Run the profit and loss report for the right dates, and check whether it's on the cash or accrual basis; QuickBooks lets you switch the accounting method on the report. Then run the balance sheet for the same date.
2. Check that every account is reconciled
Every bank and credit-card account should be reconciled through the report's end date. If an account stops reconciling in July, the profit after July hasn't been checked against the statements.
3. Look at the holding accounts
Uncategorized Income, Uncategorized Expense, Ask My Accountant and similar holding accounts should be close to zero. A large balance there is income or expense that hasn't been assigned.
4. Look for duplicates and transfers
A bank feed that was disconnected and reconnected often imports transactions twice. Transfers between your own accounts, and payments on your business credit card, should be recorded as transfers, not as income or expense.
5. Check loans, assets and owner money
Three errors understate profit: a loan payment recorded entirely as an expense, equipment recorded as an expense, and owner withdrawals recorded as expenses. One overstates it: owner contributions recorded as income.
What the checks tell you
These are questions, not conclusions, and they give no assurance about the financial statements. If they turn up issues across several months, a bookkeeping cleanup for the named periods and accounts is the usual next step. The free bookkeeping self-check asks twelve similar questions in your browser.
What happens next
Use the contact form through the contact form. Don't upload the file or send login details there.
