Run your aging reports first. For accounts receivable, pull an AR aging summary and compare it to what customers actually owe. For accounts payable, pull an AP aging and compare it to vendor statements. The gaps between your books and reality tell you where to focus.

Old balances are the biggest problem. Receivables sitting at 90+ days are often uncollectible, already paid but misapplied, or invoiced in error. Payables showing as outstanding for months may have been paid from a different account, offset by a credit you never applied, or disputed and forgotten. Research each old balance individually to determine what happened.

Unapplied payments and credits cause most AR and AP confusion. A customer pays $5,000 but it gets recorded as a deposit instead of applied to their invoice. Now you show both the payment and the open invoice. Same thing happens on the AP side when vendor credits sit unused while new bills get paid in full. Match payments to invoices and apply credits to clear these phantom balances.

Write off what you cannot collect. Accounts receivable that have been outstanding for a year with no customer response are not assets. They are bad debt. Document your collection attempts and write them off so your balance sheet reflects what you can actually expect to receive. Your accountant can advise on the proper tax treatment.

Reconcile to external documents once you have cleaned up obvious issues. Customer statements, vendor statements, and payment records from your bank should all support the balances in your books. If a vendor says you owe $3,200 and your books show $4,800, find the $1,600 difference. It is usually a payment that posted to the wrong vendor or a credit memo that never got entered.

Document every adjustment you make during cleanup. Note why balances were written off, how payments were reapplied, and what supporting evidence you used. This documentation protects you during audits and helps whoever manages the books going forward understand what happened.

Prevent the problem from recurring by reconciling AR and AP monthly instead of letting balances age unchecked. Review aging reports as part of your month-end close. Follow up on receivables before they hit 60 days. Reconcile vendor statements when they arrive instead of filing them away. Our Boca Raton advisory services include this type of ongoing oversight as part of controller-level support.

If the cleanup feels overwhelming or you are not sure which balances are valid, bringing in help makes sense. Financial records cleanup is a defined project with a clear endpoint. Once the books are accurate, maintaining them is straightforward. Letting messy AR and AP persist just makes the eventual cleanup harder and your financial statements less useful in the meantime.