As the end of the year approaches you might be overwhelmed just thinking about getting your books in order. If you are like most small businesses and submit your information to a CPA to prepare your Federal Taxes, the more organized you are the less time it will take the CPA to prepare the return, and that in turn will save you money.
Updating your bookkeeping and reviewing it prior to year-end is very important as you can actually do something about your tax situation before the new year. We put together a year-end bookkeeping checklist to get you on track.
Reconcile bank & credit card accounts
For the year-end, it’s important to make sure what you have in your financial statements matches up with your bank and credit card statements. A reconciled file that can be confirmed with a bank statement tells your tax preparer that everything is in the file.
Accounts Receivable review
Invoice customers for all goods and services you have provided to them. Review the unpaid balances and contact those customers that haven’t paid. You want to try and collect your outstanding receivables balances before year-end and possibly write off the bad debt that you never collect.
Accounts Payable review
Running your aging reports may reveal some problems. Adjust vendor balances to what you actually owe.
Profit & Loss review
It’s a good idea to run and review your Profit & Loss statement monthly, but if you haven’t now is the time to get it cleaned up. The Profit & Loss lets you see how much money you made and how you spent it. You need to review this report to make sure that your income and expenses are recorded accurately.
Balance Sheet reconciliation
Make sure to reconcile all accounts, not just bank and credit card accounts. It is also important to reconcile loans, lines of credit and payroll liabilities.
If you haven’t already done so, it is time to go over your vendor payments and see who qualifies for a 1099. We tell our clients to stay on top of collecting W-9 forms from their vendors throughout the year rather than waiting until year-end. The basic rule is that you must file a 1099-MISC whenever you pay an unincorporated independent contractor-that is, an independent contractor who is a sole proprietor or member of a partnership or LLC-$600 or more in a year for work done in the course of your trade or business.
Analyze physical inventory
Getting an accurate account of your inventory is important. Not every business has an inventory of products or supplies on hand but if you do you will want to match it with your end of year balance sheet. How did the year go for you? What services / products did better or worse than you thought? What do you need to order for next year?
Record any business expenses paid for with personal funds
You need to report any income or expense transaction related to the business that were deposited into or paid from your personal bank account.
Review open items
Review and determine if any checks need to be voided and reissued before you finalize your Dec. 31st bank reconciliations.
Prepare a budget for next year
Budgets are one of the most important business financial statements. If planned and managed well, a budget allows you to monitor the financial impact of your business decisions and operational plans.
If your current accounting methods need improvement or you are ready to hand the bookkeeping over to someone you trust, contact Quality Accounting Solutions. We can efficiently manage your bookkeeping and accounting all year long, so you can focus on running your business!