You do not need to understand debits and credits to check a bookkeeper. You need six reports, pulled on the same day each month, and a short list of what each one should look like. If all six pass, the books are almost certainly in good shape. If any fail, you have a specific question to ask rather than a vague worry. This is the review, in the order that catches the most with the least effort.
A review only works if the month is finished. Agree with your bookkeeper that the prior month is closed by a fixed day, the 10th or the 15th of the following month is typical, and that after that day nothing in the closed month changes without telling you. In QuickBooks Online that is enforced with a closing date and password under Account and Settings, Advanced; in Desktop it is under Company, Set Closing Date. Set it yourself, keep the password yourself. That single setting turns “I hope nothing moved” into “nothing moved without a warning.” If your bookkeeper does not close months at all, start with the month-end close checklist; the review below assumes one exists.
Every bank, credit-card and loan account with a statement should have a reconciliation report for the month, and the statement ending balance on the report should equal the balance printed on the bank’s own statement. Look at two lines only: the difference, which must be zero, and the list of uncleared items. Uncleared deposits older than a few days and uncleared checks older than about sixty days are the first place errors and missing money show up. A reconciliation that balances only because of a large “reconciliation adjustment” entry is not a reconciliation; it is a plug, and it is the most common way a bad month gets hidden.
Run it for the last day of the month with the prior month beside it. You are looking for accounts that should not exist or should not move: Undeposited Funds (or Payments to Deposit) holding a balance for more than a few days means customer payments were recorded but never matched to a deposit, and the same money is probably counted twice. Opening Balance Equity should be zero in any company more than a month old. A negative balance in a bank, inventory or fixed-asset account is always wrong. Loan balances should be moving down by the principal on your amortization schedule, not by the whole payment.
Not the budget, and not last month: the same month a year ago, which shares your seasonality. Revenue and gross margin within a range you can explain is a pass. What fails the check is a line that has doubled or vanished, an expense category that has appeared with a vague name, or a large amount sitting in Uncategorised Expense, Uncategorised Income or Ask My Accountant. Those holding accounts are where a bookkeeper parks what they could not identify; by review day they should be empty or come with questions for you.
The A/R aging total must equal Accounts Receivable on the balance sheet, and the same for A/P; if they differ, a journal entry was posted directly to a control account, which is a mistake or a shortcut, and either way it needs unwinding. Then read the names. Customers with invoices over 90 days that you know have paid mean payments were recorded against the wrong invoice or deposited without being applied. Vendors with a credit balance mean a bill was paid twice or a bill was never entered. Negative amounts in either aging are worth a direct question.
Run a transaction report filtered to journal entries for the month. In a small business there should be few: payroll, depreciation, prepaid amortisation, maybe a loan split. A journal entry that touches a bank account is a warning sign, because cash should only move through deposits, checks and transfers that the reconciliation can see. Then open QuickBooks Online’s Audit Log (Settings, Audit log) and filter to the closed month: it lists every transaction created, edited or deleted, by whom and when. Deleted deposits, edited reconciled transactions and anything dated in a prior closed month are the three things to click into. In Desktop the Audit Trail report does the same job, and the Reconciliation Discrepancy report lists changes to transactions that had already been reconciled.
Payroll tax liabilities on the balance sheet should equal the deposits you have not yet made, which for most small businesses is the current period only. A liability balance growing month over month means deposits are late or are being recorded as expenses instead of against the liability; both create penalties that arrive months later. Sales tax works the same way. If you outsource payroll, match the provider’s liability report to the balance sheet; the year-end payroll checklist has the filing calendar the liabilities should be tracking.
One failure is a conversation: ask for the explanation in writing and give it a week to be fixed and re-reviewed. The same failure two months running, a reconciliation that keeps needing a plug, or any edit to a reconciled transaction that nobody can explain, is a pattern, and patterns are where the signs of bookkeeper fraud start to overlap with signs of simple overload. Either way the fix is the same: an independent pair of eyes over the file before the next tax return. A QuickBooks cleanup re-reconciles every account from the last clean month, clears the holding accounts and re-ties the agings, and it gives you a baseline this monthly review can be run against from then on.
If you would rather the review were done for you every month, that is what the monthly bookkeeping service is: the close on a fixed date, the six reports delivered with the exceptions already explained, and a controller-level sign-off you do not have to run yourself.
Monthly, on a fixed day after the close, using the same six reports each time. A quarterly review misses problems for too long; a weekly one adds work without adding much detection.
The bank reconciliation report for each account, with a zero difference and a short uncleared list. Most bookkeeping errors, and almost all missing-money problems, surface there first.
Customer payments were recorded but never matched to the bank deposit. Left alone it double-counts revenue and overstates assets. It should be close to zero on the last day of any month.
Set a closing date with a password, then check the Audit Log in QuickBooks Online (or the Audit Trail and Reconciliation Discrepancy reports in Desktop) for edits and deletions dated inside the closed month.
If the review turns up more than one failed report, run the free QuickBooks File Analyzer on the file first; it flags the unreconciled accounts and holding-account balances in about a minute and tells you how deep the cleanup needs to go.
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Founder of Numerawise Solutions, established MMXXIV in Atlanta. Intuit ProAdvisor Gold tier. Former Intuit Technical Support engineer. Has personally led two hundred accounting software conversions for US small businesses since founding the practice. Reachable directly at [email protected].