7 Steps to Get Your Books Ready
It’s that time of year again: tax season is approaching, and you need to get your books in order.
If you’re like most business owners, you’ve been extremely busy throughout the year. Now it’s time to take a step back and make sure everything is in order before the end of the year—especially if you want to avoid an unpleasant surprise come tax time! Here’s how:
1. Keep track of all transactions
To make sure your books are ready to go, you’ll want to record all transactions since the last time you reconciled your accounts. This includes checks, cash, and credit card purchases. You can do this manually or with a computer program that automatically tracks every transaction. Once they’re recorded in your records, it’s time to check them against the bank statements so that nothing gets overlooked.
2. Reconcile your bank accounts
Once you have your bank account balances, it’s time to check them against your books. This is a process called a bank reconciliation. The purpose of this is to verify that your bookkeeping records are accurate and that all transactions were recorded correctly.
3. Pay attention to your receivables and invoices
Your accounts receivable (AR) and invoices are likely to be the main drivers of your business. They’re also the easiest way for you to lose money. That’s why it’s important that you check your AR and invoices at least once a month, if not more often, throughout the year.
The first thing you’ll want to do is review your list of outstanding invoices. Make sure all of them are correct and up-to-date; then check whether they’ve been paid yet or not.
4. Pay attention to your accounts payable
Now that you’ve gone through the steps of checking your accounts receivables, it’s time to do the same thing for your accounts payable. This is another big part of your bookkeeping and accounting process, so this next checklist will help you make sure everything is in order before we move on to the next step.
Check for duplicate payments
Check for invoices that have not been paid and received
Check for invoices that have been paid and received
5. Review your financial statements
Financial statements are like health checkups for businesses: they give us an idea of where we stand with our finances so that we can make adjustments as needed and get back on track with our goals if necessary. If there were any problems last year (and there usually are), this is where we stamp out those fires before anything gets out of hand in the new year!
6. Conduct an inventory count
The first step in your bookkeeping check is a physical inventory count. To do this, you will have to make a list of all the items you have in stock and then physically count each item to see how much it costs. A physical count is important because it helps you know how much stuff you have and how much it costs.
Inventory counts should be done at least once a year, but they may also be done on a monthly or quarterly basis depending on your business needs and budget.
7. Send your accountant the info they need
Once you’ve done your bookkeeping and tax preparation, send a copy of your financial statements to your accountant. Your accountant should be able to use this information to prepare your taxes. This means they’ll be able to send you an accurate estimate on how much it will cost to file and pay for taxes, as well as what tax deductions you can take advantage of this year (such as home repairs or charitable donations). If there are any issues with the figures in the statement, make sure they’re addressed before filing anything with the IRS!
Here's to a great new year with your finances!
Don’t worry, you’re not alone if this tip comes as a surprise. Bookkeeping can be a bit of an afterthought in the grand scheme of things, especially when there’s so much else going on at work or home during the holidays (and let’s be honest: no one wants to start their first week back from vacation by cleaning up old receipts). However, these tasks can make all the difference come January. You don’t want your finances to be caught with their pants down!
If you follow these seven steps before the new year hits full swing, you’ll have everything ready for smooth sailing next year—and we’ve even included a bonus tip that will help keep your finances in order well beyond 2023.
I can help
If you’re feeling overwhelmed by the thought of doing all this, don’t be! We have a lot of resources for small business owners and entrepreneurs that can help. For example, we have an awesome blog post about how to deduct your holiday gift giving (which is especially helpful during tax season).
And if all else fails, feel free to contact us at Miss Elsie’s Bookkeeping! I am happy to assist in any way possible as well as answer any questions or concerns you may have along the way.
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