How do I prepare accounts if I haven’t kept good records?

Why “bad records” are more common than you think

If you’re reading this with a sinking feeling because you haven’t kept good records, you’re not alone. Many people start a business, freelancing, side hustling, or even a small property venture without realizing how quickly paperwork multiplies. A few missed months can turn into a full year of scattered invoices, bank transactions, and half-remembered purchases. The good news is that accounts can still be prepared. It may not be fun, but it is doable—and the process becomes much more manageable when you take a structured approach.

Preparing accounts without good records is less about finding a perfect set of documents and more about reconstructing a reasonable, supportable picture of what happened financially. You’re aiming for accounts that are complete enough to be credible, consistent, and usable for tax filing, lender requests, investor discussions, or simply your own decision-making. In practical terms, that usually means: (1) capturing all income, (2) capturing all costs that relate to that income, (3) separating business from personal where possible, and (4) keeping a clear “audit trail” showing how you arrived at the numbers.

This article walks you through how to rebuild your records, create accounts from incomplete information, and set yourself up so you don’t have to repeat the experience next year. It is written to be practical, step-by-step, and realistic about the fact that you may not be able to find every single receipt.

Start with the goal: what “accounts” do you actually need?

Before you begin gathering documents, clarify what you are preparing and why. “Accounts” can mean different things depending on your situation. You might need:

Profit and loss (income statement): A summary of income minus expenses over a period (usually a tax year or accounting year).

Balance sheet: A snapshot of what you own and owe at a point in time (assets, liabilities, and equity). Smaller sole traders often don’t formally prepare a detailed balance sheet for simple tax purposes, but you may still need one for loans or company accounts.

Cash flow summary: Useful if you’re trying to understand where cash went, especially when profits and bank balances don’t seem to match.

Tax computations: The adjustments and classifications needed to file a return correctly.

Statutory accounts: If you run a limited company, there are formal requirements about format and what must be included.

Knowing your endpoint helps you decide how detailed your reconstruction needs to be. If you are self-employed and filing a straightforward tax return, you might mainly need accurate totals by category. If you are producing company accounts, you’ll need more structure, and you may need to identify debtors, creditors, loans, stock, and capital items.

Choose a timeframe and lock it in

The next step is to define the exact period you’re reconstructing. People often drift into “somewhere around last year,” but accuracy starts with certainty about dates. Decide the start and end dates of the accounting period. Then commit to handling transactions consistently within those dates.

Once you have your timeframe, create a simple “project folder” system (digital, paper, or both). Label it clearly with the period, for example: “Accounts Reconstruction: 1 April 2024 – 31 March 2025.” Even if you’re working with multiple years, keep them separate to prevent confusion and double-counting.

Build your foundation from bank and card statements

If records are poor, bank and card statements become your backbone. They are usually the most complete independent record of money in and out. Start by gathering:

Business bank statements for the full period (including any savings account used for the business).

Personal bank statements if business and personal spending were mixed.

Credit card statements used for business purchases (even if it’s a personal card).

Payment processor statements (for example, online payment platforms, card readers, marketplace payouts).

Download them in a consistent format. If you can, get CSV files (spreadsheets) as well as PDFs. CSV makes categorizing much faster, while PDFs can help with cross-checking and evidence.

If you have missing months, contact your bank and request copies. This can be surprisingly easy via online banking. If accounts are closed, you may still be able to obtain historic statements, though it can take longer.

Create a master list of transactions

Once you have statements, you need a single master list of transactions. This is where many people get overwhelmed, but you don’t need an advanced system to start. A spreadsheet can be enough, or accounting software if you prefer.

Your master list should include at least these columns:

Date (the transaction date shown on the statement)

Description (the narrative on the statement)

Money in

Money out

Account (which bank/card it came from)

Category (income, materials, travel, advertising, etc.)

Business or personal (if mixed)

Notes (what it was for, who it relates to, where evidence is stored)

Import transactions from CSV where possible. If you only have PDFs, you may need to manually enter totals or use a careful copy approach, but try hard to avoid manual entry line-by-line if there’s a better alternative available through your bank or card provider.

The aim is not to perfectly categorize everything on day one. The aim is to get all transactions into one place so you can work systematically rather than hunting through documents repeatedly.

Separate business and personal transactions (even if you mixed them)

Mixing business and personal is common, especially early on. It makes account preparation slower, but it does not make it impossible. The key is to decide a consistent method for separation.

If you have a dedicated business account, start with that. Transactions in a business account are more likely to be business-related, and you’ll have fewer personal items to remove.

If you used a personal account for business, you’ll need to mark each transaction as business or personal. Don’t overthink it. Use a “three-bucket” system:

Clearly business: Supplier payments, business subscriptions, professional services, postage, business insurance, client-related travel, etc.

Clearly personal: Rent/mortgage, personal groceries, personal entertainment, personal holidays, etc.

Unclear: Items you can’t identify at first glance.

For unclear transactions, add a note and move on. You can return later once you’ve gathered more evidence. Often the pattern becomes obvious once you see repeated payments to the same merchant or match them to emails or invoices.

Reconstruct your sales (income) first

Income is usually the most important part of the accounts, and it’s often the part tax authorities or lenders will focus on. Start by reconstructing sales in a way that is complete and consistent.

Possible sources of sales evidence include:

Invoices you issued (even if incomplete)

Bank deposits and incoming transfers identified as customer payments

Payment processor records showing gross sales, fees, refunds, and payouts

Marketplace dashboards if you sell through platforms

Point-of-sale reports if you take card payments

Email trails confirming work done and amounts agreed

Start from bank and payment processor data and build upward. If you issued invoices, check whether every invoice was paid and whether every payment corresponds to an invoice. If invoices are missing, use bank receipts as the baseline and create a sales list from incoming amounts.

If you receive bundled payouts (for example, a platform pays you weekly), you may need to treat the payout as net income and separately account for fees and refunds, depending on how you prefer to present it. The important thing is that your approach is internally consistent across the period.

Handle cash income carefully

If you received cash from customers, the bank statement may not show the full picture. In that case, you must reconstruct cash income using the best available evidence. Examples include appointment records, job sheets, till summaries, delivery logs, or even diaries and calendars. If cash was deposited into the bank, deposits can be a clue, but remember deposits can bundle multiple days.

Be honest with yourself here: if cash income exists and you omit it, your accounts can become unreliable. If you truly cannot reconstruct exact cash amounts, consider building a reasonable estimate based on your operational records, and document the basis for the estimate in your notes. The goal is to avoid arbitrary guessing and instead use a method you can explain.

Next, reconstruct your major expenses and suppliers

After income, move to expenses. Start with the largest, most regular costs because they usually have the clearest trail and the biggest impact. Examples: rent for premises, subcontractors, materials, major tools, software subscriptions, vehicle costs, insurance, marketing, and phone/internet if used for business.

Look at your master transaction list and highlight:

Recurring payments (monthly subscriptions, regular supplier invoices)

Large one-off payments (equipment purchases, annual insurance, deposits)

Known supplier names you remember using

For each supplier, try to gather supporting documents: invoices, receipts, contracts, emails. If you can’t find them, bank statements still provide evidence of payment, but invoices help you categorize correctly (for example, separating materials from equipment or identifying VAT if relevant to your jurisdiction).

Use emails, online accounts, and apps to find missing documents

When receipts and invoices are missing, your email inbox is often your best friend. Search by supplier names and common keywords like “invoice,” “receipt,” “order,” “confirmation,” “thanks for your purchase,” and “statement.” Download PDFs and store them in your project folder.

Also check:

Online retailer accounts (order history and invoices)

Software subscription portals (billing history)

Mobile app stores if you bought business apps

Courier and postage accounts

Utility providers if you have business premises

Ride-hailing or travel apps that show trip receipts

Even if you can’t obtain every receipt, you can often retrieve enough to make your categories accurate and reduce the number of “unknown” items.

Decide on a sensible chart of categories

One of the most common traps is creating too many categories. If you’re reconstructing accounts, simplicity helps. Use categories that align with how you will report or analyze results, such as:

Sales/Revenue

Cost of goods/materials

Subcontractors and freelance help

Rent and premises costs

Utilities

Insurance

Advertising and marketing

Travel and vehicle

Meals (if applicable and allowed)

Telephone and internet

Software and subscriptions

Professional fees (accountant, legal)

Bank charges and payment fees

Repairs and maintenance

Office supplies

Training

Other expenses

Keep “Other” small by revisiting it near the end. “Other” is fine as a temporary parking spot; it’s risky as a permanent hiding place.

Identify what might be capital rather than an expense

Not every purchase should be treated as an immediate expense. Some costs create a longer-term asset, such as major equipment, computers, vehicles, or large pieces of machinery. These are often treated differently in accounts and tax computations.

As you review transactions, flag anything that looks like it might be a capital purchase. A simple rule of thumb is: if it’s a significant item that will be used over multiple years, it’s likely capital. Keep a separate list with:

Date purchased

Description

Supplier

Cost

Whether it was partly personal use

Evidence available (invoice, receipt, bank payment)

Even if you’re not sure, flag it. It’s easier to reclassify later than to forget it entirely.

Deal with mileage, travel, and vehicle costs

Vehicle costs are a frequent area of confusion, especially when records are poor. There are usually two approaches: tracking actual vehicle expenses (fuel, repairs, insurance, etc.) and apportioning business use, or using a mileage-based method if that is permitted in your jurisdiction.

If you have poor records and no mileage log, your first task is to reconstruct business mileage as best you can. Look at your calendar, job locations, delivery routes, appointment diaries, and customer addresses. Many people can reasonably rebuild mileage month by month from their schedule and typical routes.

If you cannot rebuild mileage reliably, you may still use actual costs with a reasonable business-use percentage, but it needs to be defensible. Avoid plucking a number from thin air. Base it on something tangible: the number of business days, known regular routes, and approximate distances.

Whichever method you use, document it in your notes. Clear documentation matters as much as the final number when your records are incomplete.

Handle home office and mixed-use costs

If you work from home, you may be able to allocate part of certain household costs to the business (for example, internet, phone, heating, or a portion of rent). If records are poor, keep it simple and consistent.

A common approach is to base the allocation on:

Space: The percentage of your home used for business (one room out of five, for example).

Time: Whether the space is used exclusively for business or shared.

Usage: For phone and internet, estimate business use based on how you use the services.

When in doubt, choose a conservative approach and write down your method. A conservative, documented method is usually safer than an aggressive, poorly supported claim.

Account for unpaid invoices, bills, and “things that don’t show in the bank”

Bank statements show cash movement, but accounts sometimes need to reflect obligations and amounts owed. If you are preparing simple cash-based accounts, you might mainly record what was actually paid and received within the period. If you are preparing accrual accounts (common for companies and sometimes required), you need to consider:

Debtors (accounts receivable): Customers who owed you money at the end of the period.

Creditors (accounts payable): Bills you owed suppliers at the end of the period.

Accruals: Expenses incurred but not yet invoiced or paid.

Prepayments: Payments made in advance for services covering future periods.

If records are poor, you can still reconstruct these by reviewing outstanding invoices you issued and bills you received around the year-end. Look at the few weeks before and after the period end to identify what relates to the period. Again, documentation is your friend: keep a list of assumptions and how you identified each item.

Don’t forget refunds, chargebacks, and payment fees

Refunds and fees can quietly distort your income if you ignore them. Payment processors often deduct fees before paying you, and refunds may appear as separate negative transactions or reductions in payouts.

To handle this correctly, decide whether you are recording income gross or net:

Gross method: Record full customer payments as income, record fees as an expense, and record refunds as negative income (or as refunds/returns).

Net method: Record payouts as income and treat fees and refunds within that net figure.

Either approach can work for internal accounts, but gross is usually clearer. The key is consistency and making sure your totals match the evidence from the processor over the year.

Create an “unknown transactions” workflow

When reconstructing accounts, you will have transactions you can’t identify. Instead of letting them stall you, create a workflow:

Step 1: Mark the transaction as “Unknown – Review.”

Step 2: Group unknowns by merchant name. You may find that “ABC Ltd” appears 12 times and is clearly a supplier once you look them up.

Step 3: Search email for that merchant name and amounts.

Step 4: If still unknown, decide: business or personal? If it’s in a business account and looks business-like, it may be business. If it’s in a personal account and looks like everyday spending, it may be personal.

Step 5: Keep a note of your reasoning. If you later find evidence, reclassify.

At the end, aim to have as few unknowns as possible. If a small number remain and they are small amounts, it may be acceptable to classify them conservatively, but avoid leaving significant amounts unexplained.

Reconcile: make sure your totals actually tie to reality

Reconciliation is where you prove to yourself that your accounts are not missing chunks. At minimum, you want your reconstructed totals to tie back to your bank and processor data.

Key reconciliations include:

Bank reconciliation: Ensure every bank transaction within the period is accounted for in your master list and has a classification (business/personal and category).

Income reconciliation: Compare total income in your accounts to total incoming amounts identified as customer payments plus processor summaries.

Expense reconciliation: Compare total expenses to the total outgoing business payments (excluding transfers between accounts or owner drawings, depending on your setup).

Processor reconciliation: Check processor gross sales, fees, refunds, and net payouts against your recorded numbers.

If something is off, it usually means one of three things: you missed transactions, you double-counted something, or you treated transfers as income/expense by mistake. Transfers between your own accounts are especially common culprits.

Owner’s drawings, personal injections, and transfers

When business and personal finances mix, you’ll see transfers that are neither income nor expense in the operational sense. Examples include:

Owner’s drawings: Money you took out of the business for personal use.

Personal injections: Money you put into the business from personal funds.

Inter-account transfers: Moving money between your accounts.

These should be tracked separately from trading income and expenses. If you treat injections as sales or drawings as expenses, your profit figure becomes misleading.

Add categories such as “Owner drawings” and “Owner funds introduced” or similar, and use them consistently. Even for sole traders where “owner” and “business” are not separate legal entities, this classification helps keep accounts readable and reduces confusion.

What if you genuinely have missing data?

Sometimes, despite your best efforts, you will have gaps. A phone was lost, an email account was closed, or cash receipts were never recorded. When that happens, your job becomes making the best reconstruction possible and documenting assumptions clearly.

Practical ways to fill gaps responsibly include:

Supplier statements: Ask key suppliers for statements of account or invoice reprints.

Customer confirmations: If a major payment is unclear, search communications or ask the customer if necessary.

Estimate based on patterns: If you can prove that a monthly subscription was paid for 10 months and two months are missing due to lost statements, and you can retrieve the subscription billing portal showing continuous service, you may be able to infer the missing payments.

Use conservative estimates: If an expense could be partly personal, lean toward a lower business proportion.

In short: fill gaps with evidence wherever possible, and where you must estimate, base it on something real and keep the estimate cautious.

Consider getting professional help (and how to make it worthwhile)

An accountant or bookkeeper can be extremely helpful when records are messy, but the cost can climb if they’re sorting chaos from scratch. You can reduce fees and stress by doing some groundwork:

Get statements for all accounts and cards.

Build the master transaction list or at least export CSV files.

Separate obviously personal items.

Create a folder of key documents (top customers, top suppliers, major purchases).

Write a one-page summary of your business: what you do, how you get paid, what your major costs are, whether you carry stock, and any unusual events during the year.

This preparation helps a professional spend time on higher-value work: ensuring the correct accounting treatment, spotting missing items, and advising on tax and compliance.

Turn your reconstruction into a clean set of accounts

Once transactions are categorized and reconciled, you can summarize your numbers into accounts. At a basic level, you will create:

Total income for the period

Total cost of sales (if applicable)

Gross profit (income minus cost of sales)

Operating expenses (the overhead categories)

Net profit (gross profit minus operating expenses)

If you have capital purchases, you may also need depreciation or a capital allowances schedule depending on your reporting needs. If you have year-end debtors and creditors, you may need adjustments to convert cash movements into accrual-based figures.

A helpful final step is to write a short “accounts preparation note” for yourself. This is not a formal document for publication, but a record of what you did and why. Include:

What data sources were used (bank statements, processor reports, invoices recovered from email)

Any periods with missing data and how they were addressed

Any estimates used and the basis for them

Any unusual transactions and how they were treated

This note becomes a lifesaver if you’re asked questions later or if you revisit the accounts next year.

Common mistakes to avoid

1) Trying to do everything at once. Break the project into phases: gather statements, build master list, reconstruct income, categorize expenses, reconcile, summarize.

2) Categorizing while hunting for receipts for every line. Categorize from statements first; then fill evidence gaps for the biggest or most uncertain items.

3) Treating transfers as income or expense. Transfers and owner movements can quietly wreck your profit figure if misclassified.

4) Ignoring small transactions. Small items add up. Even if you use “Other expenses,” make sure they’re still business-related.

5) Overclaiming mixed-use costs. Without solid records, overly aggressive allocations create risk. Conservative, documented approaches are safer.

6) Forgetting fees and refunds. Processor fees, bank charges, and refunds can create big differences between “what you think you earned” and what you actually kept.

How to prevent this happening again

Once you’ve done a reconstruction once, you’ll probably want to avoid repeating it. The best system is one you will actually use. Here are realistic improvements that don’t require perfection:

Open a separate business bank account. Even if not strictly required, it makes bookkeeping dramatically easier and reduces the need for guesswork.

Set a weekly “money admin” appointment. Fifteen to thirty minutes a week is often enough to stay on top of categorizing transactions and saving receipts.

Use a simple capture habit. Whenever you receive a receipt, take a photo and upload it to a dedicated folder. Name files with the date and supplier, such as “2025-06-14_StationeryWorld_23.50.pdf”.

Use consistent invoicing. Issue invoices with sequential numbers and save a copy in the same folder structure.

Track mileage as you go. A basic app or even a notes template can help. The key is consistency, not fancy features.

Reconcile monthly. At the end of each month, quickly check that your recorded income and expenses match your statements and processor summaries.

These habits reduce the year-end workload and make it easier to spot problems early, such as missing payments, unusual fees, or subscriptions you no longer need.

A simple step-by-step plan you can follow this week

If your records are messy right now, use this plan to get momentum:

Day 1: Create a folder for the period and download all bank and card statements. Include payment processor reports.

Day 2: Build a master transaction list by importing CSV files. If you can’t import, start with the main business account.

Day 3: Mark transactions as business, personal, or unclear. Don’t worry about detailed categories yet.

Day 4: Reconstruct income: identify customer payments, match to invoices where possible, and list total sales.

Day 5: Categorize the biggest expenses and recurring payments. Start pulling invoices from email and online accounts.

Day 6: Work through unclear transactions in batches by merchant name. Move anything still uncertain into a conservative category with notes.

Day 7: Reconcile totals against statements and processor summaries. Fix missing or duplicated items. Then draft your profit and loss.

This plan won’t make everything perfect in a week, but it will turn a vague problem into a structured project with visible progress.

When your accounts are “good enough”

A common anxiety is not knowing when to stop. If you’re not preparing audited financial statements, “good enough” usually means:

All bank and card transactions in the period are captured.

Income is complete and reconciles to deposits and processor reports.

Major expenses are supported by invoices or at least clear bank evidence.

Mixed personal/business items are separated using a consistent method.

Any estimates are conservative and documented.

Totals tie back to real-world evidence, not memory.

At that point, you have accounts that are credible and usable. You may still find a missing receipt months later, and you can always improve your record-keeping going forward. But you don’t need perfection to move from chaos to clarity.

Final thoughts: rebuild, document, improve

Preparing accounts without good records is a recovery job. The process is part detective work, part organization, and part decision-making. The fastest route is to rely on bank and processor data as your foundation, reconstruct income first, then tackle major costs, and reconcile everything so you know you’re not missing pieces. Where you can’t obtain perfect evidence, document your reasoning and stay conservative.

Most importantly, treat this as a turning point. Once you’ve rebuilt the past, put a simple system in place for the future: separate accounts, weekly admin time, and a habit of saving receipts. That combination turns accounting from an annual crisis into a routine maintenance task—and it gives you better insight into your business all year round.