As the year comes to an end, it is important for small business owners to review their bookkeeping activities and take appropriate steps to get everything organized before the New Year begins. This will not only make tax season easier, but it will also help you get a clear understanding of your business financials, make informed business decisions, and plan for the future. In this guide, we will discuss five bookkeeping tasks you need to do to prepare for the end of the year.
Reconcile Your Bank and Credit Card Accounts:
The first step in preparing for the end of the year is to make sure that all your bank and credit card accounts are reconciled. Reconciling an account involves comparing your records with the bank’s statement and making sure they match. Any discrepancies should be addressed promptly. This will help you identify any missing transactions, unauthorized transactions, or bank errors.
Pro tip: Use expense management software like Divvy to automatically sync your transactions and streamline the reconciliation process.
Check Your Accounts Receivable and Payable:
What are accounts receivable and payable? Accounts receivable is the money that your customers owe you, while accounts payable is the money you owe to suppliers or vendors. It is crucial to review these accounts and make sure they are accurate and up-to-date. Follow up on any outstanding invoices and payments to ensure timely collection of payments owed to you. This will also help you identify any potential cash flow issues that need to
Make sure that you have an aging report for your accounts receivable and accounts payable at year-end. This will help you identify which invoices are due or overdue and which bills need to be paid. It is important to follow up on any outstanding invoices and bills to ensure that you receive the payment you expect or pay the bills on time.
Review Your Petty Cash and Expense Reports:
What is a petty cash fund? It is a small amount of cash kept on hand to cover minor business expenses such as office supplies, postage, and employee reimbursements. As the year-end approaches, make sure that all petty cash transactions are recorded accurately and supported by receipts. Also, review your expense reports for any outstanding reimbursements owed to employees.
What is an expense report? It is a detailed record of business expenses incurred by an employee on behalf of the company. Make sure to review and categorize all your expense reports for tax purposes. This will help you identify any tax deductions or credits that you may be eligible for.
If you have a petty cash fund, make sure to reconcile it before the year-end. Check to see if all receipts are accounted for and if the fund is balanced. If not, adjust it accordingly. Additionally, review your expense reports to ensure that all expenses are properly categorized and that receipts are attached to each expense.
Organize Your Year-End Documents:
Gather all necessary year-end documents such as W-2s, 1099s, and payroll taxes. These need to be filed by January 31st, so it’s important to have them organized and ready. Also, check that you have the correct accounting software or bookkeeper at hand to make sure that everything is done accurately.
Pro tip: Check with your payroll provider to see if they will automatically file these documents for you.
Review Your Year-End Financial Statements:
Before the year-end, review your financial statements, including the balance sheet, income statement, and cash flow statement. These statements will help you understand your business’s financial position and identify any areas that need improvement. Moreover, it can also help you understand your business’s true financial performance
Prepare for Tax Season:
Lastly, make sure to review your financial statements and prepare any necessary adjustments before the year-end. Consult with a tax professional or accountant to ensure that all your finances are in order and that you are taking advantage of any potential tax deductions or credits.
Here are some common small business tax deductions to look into:
Taking the time to do these five bookkeeping tasks can feel like a chore; however, they are necessary to maintain a business financially and will help in tax season or even while running your business. They will help you stay organized, identify potential issues, and make informed business decisions. If you need help with bookkeeping tasks, consider hiring a professional accountant who can do it for you while ensuring that everything is done accurately and by the book. Start now so you can start the new year right!
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