Keeping your small business afloat this year has been challenging. Throw in this year’s unexpected ups and downs as well as the holiday rush, and no one can really fault you if your books are not as organized as years past. However, if you don’t want any hassles this coming 2021, particularly from the IRS, you should organize your books ASAP.
If this sounds like an overwhelming task, don’t fret. Regardless of your books’ current state, you can certainly get them in tiptop shape before the conclusion of this tax year. Whether you run a healthcare franchise, an e-commerce store, or a dental clinic, these tried and tested bookkeeping tips can help get your books in order.
Create Your Year-End Bookkeeping Checklist
You already know that year-end bookkeeping takes a lot of work and involves multiple steps with various moving parts. But by creating a detailed checklist customized to your small business and your accounts’ specific states, you can track and complete each task more quickly.
Depending on your books’ current states, your checklist could include the following steps:
- Organize all invoices, bills, and receipts, and then enter all unlogged financial transactions this year.
- Follow up on all your accounts receivables, paying close attention to unpaid invoices and your business’s unpaid bills before the year’s end.
- Make sure that your inventory stock is updated, especially after the holiday rush has passed.
- Do your research on the tax codes for this year to prepare yourself for filing taxes next year.
- Reconcile all your financial accounts, such as credit cards, bank accounts, loans, and other funding sources.
- Calculate fixed assets’ depreciation rates for your tax write-offs.
- Produce year-end financial documents, particularly balance sheets, profit and loss (P&L) statements, and cash flow statements to assess your business’s performance this year and begin planning for the coming financial year.
Daunted by all the things you need to do to organize your books properly? Setting actionable and realistic goals could help, particularly when deciding on a specific period to finalize all your tasks. Also, you can always seek professional advice.
Confirm Your Payroll Taxes and Determine Bonuses For Your Loyal Employees
Failing to pay the wrong amount could land you in trouble with the IRS come April next year. So as you organize your books, make sure to double-check all payroll taxes. Likewise, if you took out a Paycheck Protection Program or PPP loan for covering paychecks this year, find out exactly how this could affect your payroll tax payments.
If the amount of your employee bonuses is based on your year-end profits, make sure to calculate the proper bonus tax withholdings amount before you send out the paychecks.
Set a Specific Schedule For Bookkeeping
Bookkeeping is not just something you do when you feel like it, particularly not year-end bookkeeping. So make sure to have everything fixed before the last day of the year. You have to set a distraction-free, uninterrupted time so you can focus on your bookkeeping tasks.
Understandably, distraction-free and uninterrupted time might seem impossible, particularly if you are a sole proprietor or juggling child-rearing responsibilities and running a business.
But you have to focus on doing some bookkeeping tasks even for several hours, from finding a specific day you can do bookkeeping without any distractions to allotting a few hours each day until you’ve completed your tasks.
The end of the year is always a crucial time for tax prep, especially for this year. Yes, year-end tax prep could be stressful, overwhelming, and time-consuming. However, fail to do things the right way, and you might end up facing costly penalties.