With the end of the year approaching – and a busy holiday season ahead – it’s the perfect time to get your books in order and make a list of year-end duties for your small business. By staying organized, you can help identify trends in your business’ performance and ensure a great start to the New Year. Haven’t stayed as organized as you would like? Don’t worry, we’ve compiled a few things you can do to get up to speed.
Reaffirm your accounting period.
Whether you chose an annual, quarterly or monthly method of keeping your books, it’s important to keep a schedule for filing and running reports. And no matter your accounting period, the end of the year brings a need to maintain your tax, payroll and accounting obligations. If you’re just starting out, it may help to do this every month to keep things manageable and an eye on your cash on hand.
Double check your numbers.
Once you’ve created a balance sheet (assets - liabilities = equity), you can start to double check your numbers. Don’t worry – this is a trail balance, so even if the balance you’ve arrived at seems off, you can start to troubleshoot your recordkeeping. If there is a difference between your assumed equity and your balance sheet equity, try dividing it by nine. This indicates that somewhere, there’s a possibility that you’ve made the common mistake of transposing two digits. If you can divide the discrepancy by ten, there could be an addition or subtraction mistake. One way to solve for manual data entry errors is to automate the transfer of your daily sales information with Commerce Sync.
Finalize your itemization.
When you store your receipts, don’t just leave them in a shoebox for months on end. Sometimes, certain receipts can fade before a year’s end, leaving your unable to decipher what you’ve spent. Choose a regular schedule and enter them into a spreadsheet to categorize them. As the New Year approaches, you can get a head start on this process to wrap up the final quarter.
Keep personal and business accounts separate.
Set up a dedicated business bank account. If you’re blending personal and business account activity, now’s the time to bring that to a halt. The sooner you separate your business expenses from grocery and personal shopping experiences, the easier it will be to sift through the numbers.
Now it’s time to get ready for the New Year.
Once you feel good about your regular bookkeeping duties, it’s time to start thinking about what you’ll need to wrap up by the end of the year.
Review aged, past due, receivables.
This is a great time to send overdue reminders to customers and clients. Give them enough time to respond before the end of the year. Offer an incentive to pay soon. If these go unpaid, you can decide whether to send them to collection, or write them off as a deduction.
Review your income statement.
If you’re already preparing your monthly profit and loss, or income statement, this will make things easier when it comes to quarter- and year-end statements. Compare year to date P&L to get a good idea of whether you’re spending too much or not enough. Are customers slow in paying? Are sales increasing? You’ll be able to review business performance with these statements and make changes if they are needed. Once the end of the year comes, you’ll be ready to finalize these reports.
Get employee and vendor tax records in order.
Update your vendor and lender files with 1099 information, names, addresses, etc. You’ll need to send your annual earnings for employees and independent contractors by Feb. 28 in the U.S. Remember, you’ll only need to report 1099 data for vendors if each amount is $600 or more in the U.S.
Pay sales tax on time.
Missing a sales tax deadline can cost you. If you deal with sales tax, make sure you’re paying on time.
Run inventory numbers.
Review inventory to see what’s going to sell and what won’t. Write down the value of things that can’t be sold, such as stolen, damaged, or unsellable goods. You can most likely deduct these from your year-end taxes. Take advantage of this opportunity to deduct – you don’t want to pay taxes on items that you don’t have to. Check out this Houston Chronicle article on writing off inventory.
By taking a few steps to get ready for year-end before deadlines loom, you’ll feel more relaxed about your bookkeeping, plus you’ll be able to address problems before it’s too late. If you have questions about what is required, be sure to ask your accountant.