Year end is often the most stressful time of year for small business owners. Despite the best of intentions, many bookkeeping tasks often get shifted to the back burner so you can focus on other aspects of running a business.
This transforms what would otherwise be incremental and manageable tasks into a large, time-consuming ordeal. The pressure is on because, now more than ever, your numbers have to be accurate, particularly with the planned $80B investment in beefing up the IRS. Experts anticipate that small businesses--especially those that generate significant revenues in cash--may face additional scrutiny in the coming years.
We can't undo the past, so no point in dwelling there. We can, however, stay forward-thinking and look at the actionable steps needed to make year-end as smooth as possible.
Create a Checklist
Write down everything you need to do to close out your books and schedule time to do it. It never pays to wait until the last minute.
Getting this out on paper or screen can be very empowering and motivating, as you can see what you need to accomplish and that it's probably not as large a project as it might seem.
Include any deadlines or due dates so you don't get caught off-guard or unintentionally push off an important task.
Automation will help with this process. The more automated your accounting system, the easier, less time-consuming, and less stress-inducing all of this will be.
Get Caught Up
Keeping your books up-to-date, regardless of what's going on in your business, isn't easy. However, it is easy to fall further and further behind on bookkeeping, but now is the time to get caught up.
You need everything to be accounted for before you close out the books. Figuring out what you are missing now and making the adjustments will make closing for the year a much easier process.
Here are some items you may need to catch up on:
Update Expense Records
Don't forget about things you get billed for after the fact, like utilities, Net 30/60/90 terms, and insurance. To reconcile your books, you'll need to include these. Forgetting them can throw the numbers off and waste your time.
People also tend to forget business expenses they paid using a personal account. This isn't advisable, but it happens. If you need to pay yourself back or include that expense on your Schedule-C, make sure you have the paper trail to prove it.
Update Income
Review services you've rendered but haven’t invoiced and ensure all completed payments are updated in your bookkeeping system.
Settle Up with Employees
Give your employees a deadline to submit for reimbursements. This will help you avoid discovering expenses at the last minute or, worse, next year.
Remember, if you want an employee paycheck for 2021 work to go toward 2021, you must date it in 2021.
Reconcile Your Accounts
For lack of better words - make sure everything makes sense. If you're using double-entry accounting, you may notice the sides don't reconcile. That's obvious.
But also look through the numbers for outliers suggesting there may have been a key error. For example, if your water bill normally runs $200-300 and you have a month where it's 5X that, you have an outlier requiring a closer look. If it continues to stay high after a certain date, there’s probably another issue, like a leak.
This practical example can happen in any area of your business, from marketing to payroll. The faster you identify anomalies, the quicker you can address the cause, whether it's:
An unplanned but explainable budget variance
A typo
An untrustworthy employee
It can be frustrating and time-consuming to get the numbers right, but it’s necessary. This will ensure accuracy when you go to close the books.
So don't fall for the temptation of "this is good enough." If proper bookkeeping is taking place, then those numbers are reconcilable.
Just start early, take some deep, relaxing breaths and stick to it until it's right.
Review and Plan Ahead
Now is the perfect time to look back at the year to see what went right and what didn’t. Are poor record-keeping, inability to keep up with bookkeeping, or outdated software and systems holding you back in both finances and your business as a whole?
Once you’ve determined your mistakes, you can create a plan for correcting them in the year ahead. Now is also the time to start working on:
Budgets
Forecasts
Other tools your business needs to keep your finances on track
In other words, the year's end shouldn't be a time to regret your bookkeeping wasn't up to par. It should be a time to constructively look at what you can do better in the year ahead.
Review your whole financial system and consider the ROI of outsourcing accounting next year, it may be your best option.
Turn to a Trusted Accounting Partner
This can be an overwhelming time of the year. Working with a trusted accounting partner will take the stress of end-of-the-year bookkeeping off your plate.
They’ll make sure you aren’t missing any deadlines, everything is up-to-date, your accounts are reconciled, and you’re ready for the year ahead.
Learn more about the benefits of outsourcing your accounting to a trusted partner by contacting SIMPLY Financials PLUS today.