Year-End Prep: 9 Steps To Help You Catch Up On Your Bookkeeping
Is your business behind on the bookkeeping? Don't worry. You're not alone. With so many competing priorities, little resources, and only so much time in the day, something has to give, and the bookkeeping process often does.
The good news is the year is not over. Therefore, there is time to catch up on your bookkeeping and even get ahead.
Whether you do your own bookkeeping or outsource to a bookkeeper or accountant, you can follow this step-by-step process to help your business organize itself financially and have timely tax ready financials:
1. Use Accounting Software
If your business already has this part covered, move on to step 2.
Accounting software will help make your financial life easier. It collects and summarizes the financial activity of your business for the current year and beyond.
Rather than have spreadsheets here, a bank statement there, and invoices everywhere, accounting software brings all of those items and more together, in one location.
2. Gather Receipts
Receipts help with tracking deductions, validating expenses, catching errors and other wonderful benefits. Receipts come in electronic and paper forms and could be obtained, for example, from Uber or Lyft rides, Amazon, networking events, website domain, and other business related purchases.
Don’t fret if you have not retained your receipts for the year. Start retaining them today. Using apps such as Hubdoc make the process of gathering, retaining, and organizing electronic and paper receipts a breeze.
3. Review Invoices
The last quarter of the year is a good time to review all invoices created to ensure you have collected from your customers or clients. For the outstanding payments, reach out to your customers or clients for the purpose of giving them a gentle reminder as well as keeping the lines of communication open. For those really old debts, you might consider retaining a collections agency.
4. Gather Your Bills
Review all bills received for the year to ensure you have paid your vendors in full. For the difficult to meet obligations, consider making pay arrangements with your vendor. Doing this process will maintain or enhance the good relationship you have with your vendors.
5. Reconcile your Bank and Credit Card Accounts
Reconciling your accounts ensures you have captured all financial data, especially the deductions. It also helps you catch and correct errors that can have a large impact on your financial records.
In addition to the bank and credit card accounts, you should reconcile other linked accounts, such as PayPal and Stripe. If you have employees you should also reconcile the payroll account. And if your business carries inventory, you should reconcile that account as well.
For this process to be successful, make sure you have all of your records such as the bank and credit card statements and payroll reports. And if you closed any accounts during the year, contact your former bank or credit card carrier and request copies of the statements for the months you are missing.
6. Prep the 1099s
Form 1099-MISC is used to report payments of at least $600 and/or at least $10 in royalties or broker payments made to vendors. Vendors include sole proprietors, attorneys, and other businesses filed as LLCs and Partnerships.
The biggest hiccup in preparing and filing form 1099-MISC is not having each vendor’s name, address, and taxpayer identification number. You can avoid the hiccup by collecting a W-9 form from each vendor.
Already have W-9 forms? It doesn’t hurt to ask each vendor to verify the information provided on the W-9. Making these requests will make the 1099 filing process much, much easier.
7. Verify Employee Information
This is applies even if your business has only had payroll for a few months during the year. An easy way to verify information is to ask current and former employees to confirm their information using Form W-4. Doing that ensures you have the correct withholdings, address, and tax ID numbers when filing and issuing Form W-2.
8. Seek Professional Help
In the short term it might be most cost effective to do everything yourself when it comes to your bookkeeping and even filing taxes. However, having an experienced bookkeeper or CPA review the financial information of your business is strongly advised. A professional can help reduce and eliminate bookkeeping errors while audit proofing your business should anything be questioned. As a bonus, a great professional can show you how to improve your business' cash flow.
Outsourcing is not an all or nothing act. Therefore, don’t be afraid to explore all of your options. Talk to as many professionals as needed until you have found the one that you believe can work best with you and fulfill the needs of your business.
9. Ask Questions
Too many business owners do not ask questions when it comes to organizing their finances. Please do not take anything at face value. Be curious. Being curious about your financial health will not kill the cat. Guessing or taking stabs in the dark does. Therefore put your fears and ego aside and get informed.