5 END-OF-YEAR BOOK-kEEPING TASKS TO Get YOUR BUSINESS FINANCES IN SHAPE
As the year draws to a close, small business owners must turn their attention to bookkeeping tasks to ensure a smooth transition into the new year and prepare for the upcoming tax season. Organizing your financial records not only simplifies tax filing but also provides valuable insights into your business's overall health. In this guide, we'll explore five essential bookkeeping tasks that will set your business on the right financial track for 2024.
1. Reconcile Your Financial Accounts:
Begin by reconciling all bank and credit card accounts. Employ user-friendly expense management software like Divvy to automate transaction syncing, streamlining the reconciliation process. Identifying discrepancies promptly helps uncover missing transactions or errors, ensuring accurate financial records.
2. Monitor Accounts Receivable and Payable:
Regularly review accounts receivable (customer debts) and accounts payable (vendor debts). Generate an aging report to track due and overdue invoices, facilitating proactive follow-up. This step aids in maintaining healthy cash flow and avoiding potential financial bottlenecks.
3. REVIEW Petty Cash & Expense Reports:
Verify all petty cash transactions and associated receipts. For businesses with expense reports, diligently categorize expenses for tax purposes. Reconcile petty cash funds, ensuring proper documentation for all expenses. This step helps in identifying eligible tax deductions and credits.
4. Organize Year-End Documents:
Gather crucial year-end documents such as W-2s, 1099s, and payroll taxes well before the January 31st filing deadline. Confirm compatibility with your accounting software or bookkeeper to ensure accurate filing. Explore whether your payroll provider can assist in the automatic filing of these documents.
Tip: Check with your accounting software provider to see if they automatically file these documents for you.
5. Review Year-End Financial Statements:
Before the year-end, carefully review financial statements, including the balance sheet, income statement, and cash flow statement. These documents offer insights into your business's financial position and performance, guiding improvements where necessary. Consulting with a tax professional or accountant ensures accurate financial adjustments and maximizes potential tax benefits.
Preparing for Tax Season
Finally, prepare for tax season by making necessary adjustments based on the reviewed financial statements. Collaborate with tax professionals to optimize deductions and credits, exploring opportunities such as home office deductions, vehicle expenses, and contributions to retirement plans. Here are some common small business tax deductions to make sure you don’t overlook:
Home office deductions
Vehicle expenses
Office supplies and equipment
Advertising and marketing expenses
Business insurance premiums
Charitable donations
Travel expenses
Professional development and education costs
Taking the time to complete these bookkeeping tasks may seem arduous, but the benefits extend beyond tax season. They contribute to maintaining financial order, identifying potential challenges, and facilitating well-informed business decisions. If navigating these tasks seems overwhelming, consider enlisting the expertise of a professional accountant who can manage bookkeeping responsibilities accurately, allowing you to enter the new year with confidence. Don't delay—start your financial preparations now for a prosperous 2024!