Tips for efficient year-end (and all year) bookkeeping.

Navigating the financial landscape of a business can be compared to steering a ship through uncharted waters. The constant demands of financial tasks can feel overwhelming and potentially lead to errors.

However, maintaining up-to-date accounts will significantly streamline your processes and provide a clear picture of your business’s financial health. By consistently keeping up with your accounts, you can detect issues early, plan better, and make informed decisions that enhance your business’s performance.

Completing the following steps every month will help alleviate stress for yourself and your tax preparers.

Accounts Receivable & Deposits

  • Upon receiving customer payments, ensure deposits are made promptly and recorded in the accounting software without delay.
  • Utilize electronic payments and automatic bank feeds to streamline the process.
  • Recording invoices and making timely deposits enhances cash flow, facilitates quick follow-ups on outstanding or missing payments, and helps identify customers who are behind on paying their invoices.

Accounts Payable & Payments

  • Promptly enter vendor invoices into the accounting software.
  • For services provided, request a W-9 from vendors for year-end 1099 purposes.
  • If a substantial invoice (over $2,500) is received for equipment or other assets that should be capitalized and depreciated over time, make a copy for your tax accountant.

Maintaining accurate accounts payable records enables your business to avoid double payments, identify price increases, and track trends in vendor payments. For example, identifying significant increases or decreases in amount or frequency. Additionally, you will be well prepared for January when 1099 information is due.

Payroll

  • Promptly record payroll payments if your business is not using a payroll module in your accounting software or a payroll provider with import capabilities. This will help you easily track overtime and payroll cost trends.
  • Ensure employee contact information is up to date. When quarterly and year-end reports are due, having current and accurate information makes submissions hassle-free.

Bank Reconciliations       

Completing the tasks above and utilizing your accounting software will make bank reconciliations quick and easy. This step will also help identify:

  • Missing deposits, which may signal poor cash handling or potential internal fraud.
  • Opportunities to invest excess cash.
  • Old outstanding checks that need to be reissued or voided.
  • Cash flow challenges that require attention.

It is best to have bank reconciliations performed by someone other than the individual responsible for making deposits and payments to help protect your business’ assets.

Review Financial Statements

When all other steps have been completed, a monthly review of your financial statements is necessary. This step is comparable to taking the pulse of your business. Consistently reviewing your financial statements will help you:

  • Spot areas for expense reductions before they spiral.
  • Identify and act on potential sales, investments, or growth opportunities.
  • Compare financial statements from year to year and identify trends.
  • Make short and long-term planning decisions.

Prepare for Taxes

At year-end, now that your books are up to date, it is time to gather essential documents for your tax professional. These documents include financial statements, W-9 forms, 1099 information, and employee W-2 information. Having everything up to date ensures a smooth and efficient tax filing process. Not only does this minimize stress during the busy tax season, but it also allows your tax professional to accurately assess your financial position and identify potential tax-saving opportunities.

By following these monthly steps and maintaining updated accounts you will simplify processes, have a clearer financial view, detect issues early, support better planning and decision-making, and ultimately boost your business’ performance.