It’s the end of 2021. After a year of what I hope has been a very successful and busy year for you and your business, it’s time to take a deep breath, relax, and enjoy the holiday season with friends and family. You deserve a much needed break to refresh yourself for the upcoming new year.
Before you start to really wind down, however, I have a task for you to do that will save you time and energy next year before tax season. Did you read my article last month on what to do NOW to prepare for tax season? This is part 2 – tying the bow on your year end books. This wise advice is my holiday gift to you. Trust me, you’ll be grateful next year that you completed the task now instead of scrambling next year. Tax season will be rushed and stressful if you don’t get all of your ducks in a row and all of your bows tied before the end of the year!
6 Ways To Tie A Bow On Your Year End Books
As a business owner, closing your books at the end of the year is a vital task for making tax season easy and stress-free. Making it a regular to-do in December will save you precious time when doing taxes in the new year. Here are 6 ways to tie a nice bow on your year end books.
1. Reconcile bank accounts and credit card statements for the entire year.
After you are done, investigate anything that is older than 2 months old and still unreconciled. These items may be an error in your Quickbooks file – perhaps duplicated or something got recorded incorrectly. An old unreconciled item is usually a trigger that something is wrong.
2. Balance all loans and lines of credit.
Ensure ending bank statements match what is in Quickbooks. Everything should line up perfectly. Any differences should be investigated and corrected.
3. Run an aging report for all accounts payable and accounts receivable items.
By creating an aging report, you can see how old each item is and make note of why it is overdue. Flag anything that is more than 60 days overdue. For accounts payable, why have you not paid them? For accounts receivable, will you get paid or not? Strive to close the loop on as many accounts as you can before year end.
4. Update your fixed assets list.
For all fixed assets owned by your company, detail the asset’s unique name, purchase amount, purchase date, and sale date (if sold during the year). Keep the assets on this list to anything over $1,000. Anything valued at less, such as a $50 computer microphone, doesn’t need to be included.
5. Generate a list of all quarterly estimated tax payments.
This list should include the date payments were made, which state and government agency was paid, and the amount. These payments may have been made from your personal checkbook, or paid through your company. If they were paid through your company, they were likely coded to your Owner’s Draw account in your equity section. or recorded (in error) as a tax expense on your Profit and Loss statement.
6. Record all charitable contributions made by your company.
Include the date you contributed, the charity’s legal name, and the amount.
You may feel like you are channeling your inner Ebeneezer Scrooge by preparing for tax season around the holidays, but it’s a wise gift to give yourself that will bring bountiful benefits in the new year. If you’d like assistance closing your year end books, I would love to help. Contact me anytime.