Grades of Bookkeeping

When I talk with clients, especially about bookkeeping, I try to explain that there are vary grades of bookkeeping, from an F to an A+. They are all 'bookkeeping' but in varying levels of quality. I'm going to explain them with this article:

A+ bookkeeping can also be called "Audit Ready". Audit ready, in my case, means ready to respond to an IRS examination. For each item on the books, there needs to be a connection to a bank statement AND a receipt. Having this all in one place and reconciled to the bank and credit card statements will blow any auditor's socks off as well as providing good data for business insights.

B bookkeeping would be 'almost audit ready' and is usually missing one of the parts of A+ bookkeeping. For example: the books are all reconciled to bank statement lines, and receipts exist somewhere but aren't organized.  This standard of bookkeeping will provide good data for business analysis but will make an audit difficult.

C bookkeeping is "good enough" and is the minimum to produce anything useful for business analysis. This standard is reconciling or categorizing bank and credit card data without backup documents or receipts. This method is OK for internal use but will get you beat up pretty badly in a tax audit.

D bookkeeping is an attempt at C level bookkeeping but with bank statement information that is incorrect. It does not match the bank and is missing or containing duplicate information. This level of information can be misleading for business information and is not great for audit purposes.

F bookkeeping is either fabricated, fraudulent or non-existent. No one uses it for business information, it will fail you in an audit and maybe also get you some jail time if you are using fabricated books in an audit.  Note: Fabricated and reconstructed are not the same words and are a topic for another article.

I provide A+ bookkeeping when hired by clients. If a client would like to use a lower standard that is fine, it is their business and their budget. For grades B through D I am happy to work on a consulting or training basis where the client is the lead on the books. For client's with grade F books, I can work to do repairs to get them to at least a D.