The classic warning signs: a growing suspense account, negative cash balances in the ledger, banks unreconciled for months, VAT filed from spreadsheets instead of the system, and owner personal expenses mixed into company accounts.
Any one of these means your reports are fiction. All five mean your auditor will find them for you — expensively, and at the worst time.
A proper cleanup rebuilds opening balances, reconciles every account, and separates what belongs to the business from what belongs to the owner. Done once, properly, it makes every month after cheap to maintain.
One: the bank has not been reconciled in months
This is the first thing to check and the most reliable signal. If the last bank reconciliation is three months old, every number downstream is unverified — because the bank is the one balance with independent external evidence.
Ask for the most recent reconciliation. Not the bank balance, the reconciliation. If it takes more than a day to produce, that is the answer.
Two: suspense, or a "difference" account with a balance
A suspense account is a parking space for entries nobody could classify. That is fine for a week. A suspense balance that has survived a year is a stack of unresolved questions, and it always resolves in the least convenient direction.
Related: any account named "other", "miscellaneous" or "adjustments" carrying a material balance. These are where things go when the answer was not obvious.
Three: VAT filed does not agree to VAT in the ledger
Add up the VAT you filed for the year. Compare it to the VAT control account. They should agree, allowing for timing.
If they do not, one of two things is true — the returns were prepared outside the ledger, or the ledger has been adjusted since filing. Both need resolving before year end, because the auditor will do this comparison anyway.
Four: receivables nobody recognises
Print the aged receivables and read the names over ninety days. In most SMEs with drifting books you will find invoices already settled but never matched, duplicates, and one or two balances that relate to a dispute settled long ago.
Overstated receivables overstate profit. They also make your collections look worse than they are, which distorts every decision built on them.
Five: the numbers change after they are reported
You saw a figure for March. In June, March reads differently. Nobody flagged it.
Prior periods should only move for a stated reason. Silent restatement means entries are being posted to closed months, which means the month was never really closed.
Why year end is the deadline that matters
Every one of these gets more expensive with age. A cleanup done in the last quarter is a defined piece of work against a known period. The same cleanup started when the auditor raises it becomes a reconstruction, under time pressure, while the auditor waits — and audit fees rise when the file is not ready.
The practical test: could you hand your ledger to an auditor next week and explain every material balance? If not, you know what the work is.
Key points
- Bank reconciliation age is the single most reliable signal
- A surviving suspense balance is unresolved questions, not a rounding issue
- Filed VAT must agree to the VAT control account
- Aged receivables usually contain settled and duplicated invoices
- Silent restatement of prior months means nothing was ever closed
Practical checklist
- Ask for the most recent bank reconciliation, not the balance
- Check suspense, "other" and "adjustment" accounts for balances
- Reconcile filed VAT to the VAT control account
- Read every receivable over ninety days by name
- Compare a prior month's reported figure to today's ledger
- Start the cleanup before the auditor sets the timetable
