Blog

Tax Time is coming …. Dun Dun Dah

Did you just look over at your overflowing, receipt laden desk …

Are you worried that your accountant will lock his doors when he sees you coming …

Here are some quick tips to help you get ready for December 31, 2020.

1.       Get your paperwork organized …

Sort your receipts and other paperwork into envelopes by month. Include all monthly bank, credit card, and loan statements in the envelope. This makes it easier to find. If you really want to save some money at the accountants or bookkeepers, sort your receipts to the bank or credit card statement that they appear on and file each in its own envelope. The same goes for your deposits. Make sure that copies of the deposit receipts or invoices are included with your statements to ensure the fast processing of your paperwork.     

2.       Be ready for the rush …

If you do the posting into your accounting software, make sure everything is in by doing your month-end bank reconciliations. This is the process where you confirm that every transaction on your bank statement is also in your accounting program. Once you have confirmed all the transactions are there it is time to look at the transactions in your software that are not on your bank statement.  Were they entered into the wrong account? Are they double entries? Time to do some investigation and some cleanup.

3.       Double check …

Now it’s time to open your reports page to pull a Profit and Loss or a Trial Balance and review your accounts. Did you really spend that much on office supplies?  Maybe you should check by looking at the detailed ledger for that expense. This list will show every transaction that you have allocated to the expense. Make notes about the anomalies and if the purchase is over $500 you can allocate it as an asset to be expensed over multiple years rather than all at once in the year purchased.

4.       Who still owes you …

Pull your Detailed Accounts Receivable report and make sure that everything listed is still outstanding. If you have accidentally entered a payment without linking it to the invoice, now is the time to fix that. What is left on your report is outstanding, is it all collectible? Now is the time to record what invoices you think are uncollectible and decide how you are going to deal with them. If you are going to write off any of the invoices, now is the time to do it, or you can provide the list to your bookkeeper or accountant to deal with. Make sure you keep a copy, some software’s are very picky about how you record these transactions.

5.       Who do you owe …

Time to do, what you did for accounts receivable, for your accounts payable. In this case, did you double enter a bill, did you enter the payment as an expense without attaching it to the bill? Did the order get canceled? Did you miss something? Are there bills you haven’t entered? If you have a home office, make sure to include the portion of your home office expenses that you are allowed to claim. No one wants to pay more tax than they have to. (For details regarding what home office expenses to include click here)

6.       1 widget, 2 widgets, 3 widgets ….

Count your inventory as close to your year-end as possible. This may sound simple but you will need to give it a dollar value. If you don’t know what each item costs you then you will need to make some educated estimates. Your inventory is one of your assets. If you don’t do regular inventory counts during the year make sure that you count it now because your accountant will have to do an entry to your books for it.

7.       Reflection and Planning …

What are your goals for the next year? Did you meet the goals you set for this year? Looking at the bigger picture will help you make decisions that will affect your business now and into the future. How can you improve on what you do? Are the financial criteria that are needed to help you meet other goals? Bring your thoughts to your accountant, they are there to help you with business planning and tax planning.

Everyone loves a clean set of books. Being able to open your financial reports and see where your business is at more than once a year is a great tool for all business owners. If you need help keeping your books up to date, see how Preferred Client Services’ team of bookkeepers can help your business. Contact us and tell us how we can help you.