The end of the year can be a hectic time!
With finalizing your year-end bookkeeping, getting 1099s and W-2s ready, preparing and gathering documents for your tax advisor. It’s a time where you are planning ahead for next year, what changes do you want to make, and the schedule you want to create.
In addition, you may find that your personal life is hectic, with shortened daylight hours, holidays, parties, children home on school breaks. It’s no wonder why your stress levels rise!
September is a great time to ease your way into your year-end processes. By starting now you can breeze through December and January, allowing you to have more time to focus on what’s important – You!
The biggest crunch and strain that most business owners face is getting their financials and bookkeeping in order for taxes. Not only will having your financials up to date prior to year-end help with filing your taxes, but it will also help you plan and budget for the following year.
Here are some tips for getting your books in order.
Gather All Documents
Gather up sales invoices and vendor purchases, as well as any record books for sales and purchases. Include anything else you have that is relevant to your finances, such as checkbooks, petty cash records, and payroll records.
Keep all of these with a copy of your ledger to give to your accountant at the end of the year (if you have one). If you use bookkeeping software, either use it to generate financial records or include a digital copy of your data. The more information you can give your financial professional, the more detailed a year-end report he or she can generate.
To close the year, and protect yourself in the event of a future audit, you can use one of the following methods or even a combination of the two.
- Purchase plastic filing bins for the year’s paperwork. File by either month or the more traditional alphabetic method.
- If you prefer to go digital, scan your documents into a digital filing cabinet. Make sure that you have at least two copies of the digital file with one kept off-site or virtual.
Reconcile All Financial Accounts
A reconciliation ensures that the amount indicated in your bookkeeping (whether paper or software) matches the balances from your bank, credit card, or loan statements. By keeping up with these at regular intervals, such as every month, your records will be up to date which makes year-end a breeze, and you will confirm the amount of cash and the balance of loans the company has is accurate. It will also quickly detect cases where fraud has occurred. This will enable you to develop better controls.
Tax Prep Tips
Create a folder (paper or digital) to pass to your tax preparer. Items to be included in this folder are major purchases and sales of business assets (vehicles, buildings, equipment, leases).
Talk to your tax preparer between September and November about purchases that you can make to improve your business while taking advantage of any tax deductions you can get for the current year.
Double-check your inventory. Do an initial inventory count to see your levels and what you need and will not need to reorder for this calendar year. And to pass on to your tax advisor to see if you are eligible for any deductions due to a decrease in market value.
Now is also the time to look for a new tax preparer. If you wait until next year they may be too busy to meet with you or put your returns at the bottom of their pile. Do your research now, have an introductory meeting, and let them know what you are looking for. Would you like them to:
- Only prepare your year-end tax return?
- Have them review your finances a couple of times during the year?
- File your sales tax returns?
- Make recommendations on tax savings?
Start Thinking About Next Year
To get a jump start on next year now is the time to think about where you want to be financially and any changes you may want to make.
- Where do you want your business income to be?
- How much do you want your take-home pay to be?
- What changes do you want to make with your products and services?
- Do you need to update your processes or systems?
- Will you want to bring on new team members as either a contractor or employee?
- Do you need to find a new location?
- Is it time to find a business coach?
By looking at these areas, and more, now you can get things in order to help you ensure your business sees a smooth transition into next year.
Over the next couple of weeks, I will share more information on how to prepare for year-end. Connect with us on LinkedIn or follow us on Instagram.
Here’s to a smooth and stress-free end to 2021.
Profit First Coach and Business Growth Strategist
Spire Business, Inc.