As mentioned in last week’s blog, I often conduct an accounting clean-up as part of an initial client review.  I like to address chart of account shortcomings first.  Once accounts are (re)numbered, merged, inactivated, added, or otherwise modified, I still prefer to delay my reconciliation work until I have cleaned up the customer and vendor lists.  

Why,” you may ask.  “That’s not a priority task; it can be done any time.”  Yes, and no.  I find that cleaning up customer and vendor lists can make initial Accounts Receivable and Accounts Payable reconciliations easier.  Doing so can also fix these, all too common, issues: 

Duplicate Names
We’ve all seen them.  The same customer appears as XYZ Company and as XYZ Co.  Or different branches of the same national firm are poorly differentiated/abbreviated:  CVS-Norwalk. Is that in Norwalk, California, or Norwalk, Connecticut?  The Merge menu option is a first step in many a clean-up.    

Missing Information
It is so easy to use shortcuts to create customers or vendors without inputting necessary information.  Such quick adds allow you to book a bill or issue an invoice.  Not a problem . . . until there’s a problem.  “Who should we contact about this unpaid invoice?”  Emailing to seldom generates a response to a billing question.  

Improper Default Accounts
Another consequence of using quick, new-accounting-file setups is failing to input default expense account settings for vendors.  Often, no expense account is specified, so the program defaults to “Uncategorized Expenses.”  When 10% or more of your monthly expenses are uncategorized your P&L is not a very useful report.     

Inactive Customers or Vendors
I usually discuss establishing a policy or inactivating customers and/or vendors that have not had a transaction in the past 18-24 months.        

Bank Account/ACH Vendors
I worked with one client whose vendor list seemed to include every gas station and pizza parlor within a twenty mile radius.  Did I mention every Starbucks, Dunkin Donuts and coffee shop too?   I could go on.  There are downsides to how some companies work with linked bank feeds, not to mention how they distinguish between personal and business expenses.  

Cleaning up your customer and vendor lists is more than just OCD accounting behavior.  It will speed up invoicing and bill entry.  More importantly, it leads to greater consistency.   With default accounts properly set up and fewer names to choose from, bookkeepers and accounting clerks will make better choices.  

 Consider making a better choice, yourself.  Subscribe to this blog.  Next week, I will cover how account reconciliations are an essential part of an initial accounting clean-up.         


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