Prepare your books for year end
There are a lot of benefits to having your accounting books accurate and up-to-date but the following come to mind as we start heading towards the new year and will need to be filing tax returns soon.
· potentially lower tax preparation fees
· faster turn-around time for the preparation of your tax return
· better preparation in the event of an audit
We could go on, but these are the things that come to mind when thinking about tax compliance and good records.
Monthly clients of a small business accounting firm like The Keller Group, PA will have all of this taken care of by one of our team members. If you are doing this on your own or supervising an in-house bookkeeper, read on for some helpful tips to get prepared!
Reconcile your bank and credit card accounts
If you are going to do anything, please do this. Accounting software can make this easy to do but be sure to review all the outstanding items. Ensure that the bank reconciliation actually agrees to the financial statements after accounting for the outstanding items. This is a common issue that we find in self-prepared books. Again, the software makes the process look easy but knowing what to look for can help identify errors and duplicate items. Be sure to save the bank statements and year end reconciliations.
Obtain statements for outstanding loans
One mistake we commonly see is not separating interest and principal when paying down loans. If you haven’t been splitting the payments out all year, now is the time to get some interest expensed and agree the loan principal on the books to the statements.
Review vendors for 1099s
The best thing to do before paying a vendor is to determine whether they will need a 1099 before any payment is made. The second best time to do this is now. You will need to provide your vendors with form W9 requesting their tax identification number. You can mark these vendors in your accounting system as 1099 eligible or keep a separate list to ensure that all vendors that need a 1099 receive one.
Review your assets
In many states, you will be assessed property taxes on all of your business personal property. Do you want to pay taxes on a 20 year old computer that is still in your asset listing? I didn’t think so. Review the depreciation schedules and remove assets that are no longer in service.
If you have purchased new assets, it’s a good idea to share the documentation with your accountant.
Check your payroll expense and liabilities
If your payroll is integrated into your accounting software AND was set up correctly, there is a chance that payroll is being presented properly in your books. In most cases, we find that adjustments are needed to ensure that all expenses in the books match the payroll records and all year end liabilities are accurate. Even if the payroll was done properly, we commonly find other expenses posted to payroll accounts that do not belong there.
Save your documentation
It’s a good time to be sure that all of your supporting documentation is saved in a place where you can retrieve it later if you need it. Do NOT rely on bank access to retrieve these records down the road. Some banks have limited access to older records. You might also change banks and lose the history that was there.
Performance Review & Goal Setting
Now that most of the year is in the books, it is a great time to reflect on how things unfolded in your business versus what you planned. Did you meet all of your targets? Where did you come up short? What actions can you take to move your business forward in the upcoming year?
Once you have thought through these items, it’s time to prepare a budget for the upcoming year. This budget will allow you to compare performance in the upcoming year to your plans.
Contact a small business accounting firm
If all of this sounds like to much, give us a call and we would be happy to discuss how we might work together to make year end a snap!