5 Tips to Make Year End Accounting Quick and Painless

Year end accounting

Small business owners often start to sense fear and dread creep in as tax season approaches.

After all, many of the challenges that small businesses face throughout the year can lead to year end accounting missteps. These mistakes along the way can cause major problems when tax season arrives.

Perhaps you operate understaffed, experience high turnover rates, or trust your financial recordkeeping to sources with questionable levels of expertise, which are all common challenges for small business owners.

Small business and rookie entrepreneurs often operate with a smaller staff or with employees who share multi-departmental duties out of necessity. But, unfortunately, this doesn’t matter when it’s time to answer to the IRS.

Are you holding your breath and crossing your fingers in hopes of a smooth tax season this year?

Instead of leaving your taxes to chance, try these year end accounting tips for success!

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1. A Year End Review

Now is the time to touch base with your bookkeeper or finance department to find out any crucial need-to-know information for your yearly review.

Set time aside for a year end accounting review with whoever is responsible for maintaining your books.

Prior to the meeting, ask the responsible party to run all pertinent reports for the year, as well as an overall report from last year. This information is critical for you to be able to track your annual progress. It will also make you aware of any discrepancies and allow time to address concerns or ask questions regarding profit and loss and your balance sheet.

If there are any discrepancies or areas that need immediate attention, take action. Don’t put off the grueling task at hand of combing records if it’s necessary to ensure that everything balances as it should.

Once you are confident that everything is presented correctly and your reports are 100% accurate, you should compare this year to last year.

Hopefully, the records have been kept up to date so there are no glaring, time-consuming issues that come up during your year end accounting check-up.

Make sure that you are keeping a record of annual profit growth or loss that includes monthly and yearly totals and how these compare with the preceding 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.

A reliable accounting software program is extremely helpful in tracking these expenditures on a regular basis. This task is far less likely to be overwhelming when expenses are entered according to when they occur, rather than in a year end accounting frenzy.

Plus, if you are not keeping a current record of receipts, it is highly likely that it will cost you money in the long-run. Inevitably, you will forget to log an expense from earlier in the year or receipts are lost in the paper shuffle from time to time, resulting in fewer funds that you are capable of including as write-offs.

If you already have a finance software program in place, it will tally these totals and categorize spending for you. But if not, you will need to make sure that this is done prior to meeting with a tax professional.

3. Accounts Receivable and Plan for the First Quarter of the New Year

Collect all unpaid accounts receivable and bring as many payments up to date for monies owed as possible.

Reconciling debts should be considered a year end accounting priority.

Cash Flow Damage Control

29% of small business failures occur because of cash flow problems. This means that many business owners are unable to manage the cash needed to keep their companies up and running effectively.

Some owners, especially during start-up, don’t recognize that just because a company is earning profits, it doesn’t exclude them from a lack of cash flow.

A steady, dependable cash flow is what keeps businesses operational. In other words, your cash flow is what pays the bills.

One way to avoid problems with cash flow is to keep operational expenses paid in a timely manner.

As part of your year end accounting check-up, begin the habit of starting each year fresh, free of invoices carried over from the prior year.

If you incorporate this practice into your year end accounting routine, you are more likely to maintain a realistic perspective of what’s needed to run your business. And, this will help you to make it through the year without running too low on funds.

Beginning the new year free from outstanding debts gives you the best chance of sticking to an annual budget. It also helps prevent the oversight of bills you haven’t paid, which can easily become forgotten until they present as a matter needing immediate attention down the road.

Pay it Forward

Once outstanding invoices have been paid, take a look at which of your bills recur on a monthly basis. For most people, this won’t require much effort as almost everyone will have a monthly budget already in place for their business.

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 it is a bill that varies from month to month, go ahead and set aside funds for the first quarter’s estimated amount that you will owe.

Planning ahead for your first quarter’s payments will relieve a potentially stressful start to the new year. That way, you can go into the year ahead focusing on things besides financial woes. If possible, stay ahead on payments as the year progresses.

4. Payroll Compliance Preparedness

Before you know it, January will flash before your eyes and if you haven’t cranked out W-2s for your employees, your business could be at risk for a federal violation.

When the holidays arrive, you may feel like coasting on autopilot until after the New Year. But, you need to keep in mind that January tends to fly by fast.

It’s a good idea to tend to as many of January’s duties as possible before taking a break for the season’s festivities.

Be sure that your payroll is in compliance with all federal regulations. If you have already paid your employees for the month of December, you can move forward with tallying their yearly earnings. Just don’t forget that tax records must show any bonuses, overtime payments and commission checks.

Now might be a good time to review compliance guidelines if you aren’t sure what all qualifies. You might be surprised how some of the rules work, so don’t take it for granted if you aren’t sure what to do about a specific set of circumstances.

You definitely don’t want to leave your adherence to federal compliance guidelines to chance when performing your year end accounting wrap up.

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. Get Ready for the New Year

There’s nothing quite like the fresh start of a new year. How you begin the year ahead will set the tone for the next twelve months of your personal and professional life.

When you open up a brand new calendar, it feels so good to have the loose ends from the previous year tied up. You can look ahead with anticipation and excitement.

However, a lack of preparation can mean that you begin the year with anxiety and a long list of looming responsibilities instead.

Give yourself a special gift this year with a new beginning that’s free from worry.

Review your financial system so that your year end accounting will be even easier next year. If the process of year end prepping overwhelmed you this year, look for software that will simplify the steps for your next go around.

You might want to consider outsourcing accounting duties this year. Or, perhaps a new office software might be helpful. Maybe it’s time to replace outdated practices so that your business can reach its’ maximum potential going forward.

Whatever it takes, having peace of mind for the new year ahead is worth it.

Year End Accounting: 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.

No matter how big or small your business, we offer services and solutions that can help your company reach success. From outsourcing to software, we provide top-notch accounting assistance to keep you organized and professionally prepared, all year long.

Contact us today to find out how we can help your business have its best year yet!

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