No matter how organized you think you are, it always seems like the end of the year sneaks up on you. Before you know it, it’s time to close out the books and get your tax documents in order. But what exactly does that mean?
Advice from the Experts
Adams Accounting Solutions specializes in small business tax preparation in Johnson County and the Kansas City metro area. Our clients often ask when is the best time to start planning for tax day. We always recommend starting early because, despite the best intentions, life gets in the way. Projects fall apart, new employees come on board, customers who owe you money go out of business…the list of distractions is endless. Starting early on essential tasks like closing out the year and preparing for tax day ensures everything gets done on time — no matter what emergency pops up.
We’ve compiled a list to help business owners close out the year and prepare for what’s coming in April. It’s not too early to dive in. There’s no time like the present!
#1. Gather financial documents.
The first step in getting organized is knowing where everything is. If you’re planning on having a CPA do your taxes for you — and we highly recommend that — it’s critical that all your financial documentation is in one place. You’ll need any document that shows how the business did this year: cash receipts, bank and credit card statements, balance sheets, statements from third-party payment processors like PayPal and Stripe (if applicable), sales records, and payroll information. If you have a bank loan, you’ll need information on that, too, including the current balance and the amount of interest you’ve paid on the loan this year.
#2. Examine accounts payable and receivable.
Part of balancing the books at year-end is knowing how much money you owe others and how much others owe you. This is the time to start reviewing accounts payable and receivable with a fine-toothed comb. If you have bills outstanding, it may make sense to pay them now, but in some cases, it may not. It’s often beneficial to carry larger expenses into the following year. A quick discussion with your accountant will help determine which step is right for you.
#3. Double down on bill collection.
Once you’ve reviewed your receivables, it’s time to get on the phone and start calling. You might be able to encourage a few of your debtors to pay up before the end of the year. The more money you can collect now, the more revenue you can put toward the bottom line.
#4. Reconcile bank and credit card statements.
Many entrepreneurs are guilty of putting off bank account reconciliations until the last minute. By then, a year’s worth of statements has piled up, and any problems that may have arisen during the year are much more challenging to sort out. If this sounds familiar, now is the time to dive into this project. Reconcile all bank accounts and review credit card statements to ensure there were no unauthorized or mistaken purchases. If you see something that looks fishy, you still have time to sort things out before taking your documents to your accountant early next year.
#5. Measure your performance.
A good business practice to develop is to set goals at the beginning of each year. That way, at the end of the year, you have something to measure your success by. As you pull your financial documents together, you’ll begin to get a clearer picture of how your business is doing. If you’re not where you want to be, you can examine the reasons why. When you talk with your accountant next year, discuss your findings with them. They may be able to help you adjust your goals for next year.
How Adams Accounting Solutions Can Help
At Adams Accounting Solutions, we understand how much work you’ve put into getting your business off the ground. We want to help you keep it running efficiently. Part of that is putting the tax guidelines to work for you, helping you realize potential tax deductions so you keep as much of your hard-earned money as possible.
If you’re ready to start on your year-end accounting close-out, give us a call to set up an appointment. We’ll go over everything with you and help you pave the road to financial success!
