5 Tips to Make Year End Accounting Painless
Small business owners often feel a sense of fear and dread as tax season approaches. After all, many of the challenges organizations face throughout the year can lead to year-end accounting mistakes. These mistakes can cause significant issues when tax season arrives.
Perhaps your business experiences high turnover rates, or you operate understaffed or trust your recordkeeping to questionable sources with limited expertise, all of which are common problems for small business owners.
Small businesses often operate with a smaller staff or with employees who share multi-departmental duties out of necessity. But, unfortunately, this doesn't matter when the IRS is involved.
Are you holding your breath and hoping for a smooth tax season this year?
Instead of leaving your taxes to change, try implementing these year-end accounting tips.
5 Year-End Accounting Tips
1. Year-End Accounting Review
Now is the time to review and chat with your bookkeeper to find any critical need to know your yearly review.
Set aside time for a year-end accounting review with whoever is responsible for maintaining your financial records.
Before the meeting, ask that person to run all pertinent reports for the year. This information is critical for you to understand and track your annual progress. You will also be made aware of any discrepancies giving you time to address your concerns and ask questions.
If any discrepancies need immediate attention, don't wait; take action. Don't put off the task of combing through records to ensure that everything balances the way it should.
Once you are confident that your accounts are 100% accurate, you should compare this year to last year. Hopefully, the records are up-to-date, and there are no glaring issues that come up during your year-end accounting check-up.
Make sure that you are keeping an annual record of profit growth or loss that includes monthly and yearly totals and how they compare with the proceeding and following years' numbers.
2. Compile and record receipts
When you are a small business owner, especially during the first year or two, it's easy to let receipts accumulate in a file cabinet or shoebox. But, you will need these to track your business-related expenses that have accrued over the months.
As a small business owner, especially during the first couple of years, it's easy to accumulate many receipts in a cabinet or shoebox. But, you will need those receipts to track your business-related expenses that have accrued over the months.
Working with a team of accounting professionals is essential. Still, if you are on your own, a reliable accounting software program like Xero or QBO helps track your expenditures regularly. It will make the task less overwhelming, allowing you to avoid the frenzy.
3. Plan for q1
Collect on all unpaid accounts and bring as many up-to-date as possible. Reconciling debts should be considered a year-end accounting priority.
Cash Flow Damage Control
Almost 30% of small business failures occur because of cash flow problems. This means that many small business owners cannot manage the cash they need to keep their organizations up and running.
Especially during start-up, some owners don't recognize that just because a company is earning profits doesn't exclude them from a cash flow.
A steady cash flow is what keeps businesses operational. In other words, your cash flow is what pays the bills. One way to avoid cash flow problems is to keep operating expenses paid on time.
As part of your year-end accounting check-up, get in the habit of starting fresh and free of invoices carried over from the prior year. If you incorporate it into your routine, you are more likely to maintain a realistic perspective of what's needed to run your business, which will help you make it throughout the year without running too low on funds.
Pay it Forward
Once outstanding statements have been paid, take a look at which of your bills recur monthly; this won’t require much effort for most people as almost everyone will have a monthly budget already in place for their organization.
If there are bills that are the same amount, either monthly or quarterly, you can go ahead and pay the next expected payment amount. If a statement varies from month to month, go ahead and set aside funds for the first quarter’s estimated amount that you will owe.
Planning for your payments for the first quarter can relieve a potential stresser. That way, you can go into the year early, focusing on things besides financial woes. If possible, stay ahead on payments as the year progresses.
4. Payroll Compliance
Before you know it, January will be here, and you'll need your payroll provider to crank out W-2s for your employees. If you aren't using a payroll provider, you will need to do so as you are at risk for a federal violation if they are not submitted. Keep in mind that January tends to fly by fast, so it's good to tend to as many of January's tasks if possible before taking in the holiday festivities.
Be sure that your payroll meets all federal compliance regulations. If you've already paid your employees for December, you can tally their yearly earnings. Remember, that tax records must show any overtime, bonuses, or commission checks.
You can also avoid dealing with impatient employees by collecting W-9s and getting a jumpstart on sending out your W-2s and 1099's.
5. Prepare for the new year
When you pop open a brand new calendar, having the loose ends from the previous year tied up feels so good. However, if you lack preparation, you might begin the year anxious with a long list of responsibilities ahead.
Review your financial process so your year-end accounting will be easier next year. If the process of year-end prepping has you overwhelmed, look for software that will simplify the steps for your next go around.
You might want to consider outsourcing accounting duties this year. An outsourced accounting provider can help replace outdated practices so that your business can scale.
Whatever it takes, having peace of mind for the new year ahead is worth it.
The Bottom Line
If you aren't quite sure how to boost your business in the year ahead, we can help you find the right solution. We offer services and solutions that can help your company grow from $1MM to $20MM. We provide quality accounting assistance to keep you organized and professionally prepared all year long, from outsourcing to the software.
Contact us today to find out how we can help your business have its best year yet!
