The year is almost coming to an end, and as of January 1, we will be in tax season. If your business runs on a calendar year, have you been keeping your books up-to-date and preparing your tax documents?
We all know how important business planning is, but it’s easy to put off these critical tasks when your company already has so much preparation to do for the new year. This is the final stretch for the financial year, and we’ve put together several necessary tasks you should complete so that your financial transition into the new year is smooth and easy.
Year-end adjustments are accounting procedures that are rolled out at the end of each financial year. These procedures are crucial when it comes to creating a company’s financial statements such as profit and loss statements or balance sheets.
Year-end adjustments are mainly determined by how consistently your company’s books have been maintained every month. Some common year-end adjustments include:
- Accrual of expenses and revenues for which supplier invoices have not yet been collected.
- Reclassification of entries when a long-term debt may be due within a year.
- Adjustments based on external audits. For example, an auditor may find that a company has over or under-expressed their inventory.
Keep Your Books in Order
Complications with your taxes because of missing or incorrect transactions can be extremely stressful, but this problem can be easily avoided. Consistency is key when it comes to managing your books.
Make sure you record all of your business transactions properly by categorizing each one of them as accurately and frequently as possible.
To manage your time effectively, you should have your books balanced in advance. Ideally, your books should be managed on a month-to-month basis. Keeping your books accurately maintained means to have the sum of all the payments your business makes equal to the sum of all debits. Also, don’t forget to make sure that your books match your bank records.
Review Your Balance Sheet
Balance Sheets are important because they show the financial position at a particular point in time. You can identify the value of all assets, liabilities, and equity by having this report.
It is essential to not only validate the ending balances in comparison to their statements but to validate balances in accounts that do not have statements as well.
Balances to Confirm:
- Checking and Savings
- Credit Cards
- Payroll Liabilities
- Sales Tax Liabilities
- Year-End Inventory
Keep in mind to write off any developing past due to receivable balances, so that your books accurately reflect what you think you will be able to collect. Reconciling your accounting records, outstanding payables, receivables, and inventory can help reduce your tax liability.
Prepare Your Documents
For small businesses that rely on independent contractors, it’s important to to file all 1099-MISC forms as soon as you can. These are informational returns issued by an employer for freelancers, contractors or consultants. According to the IRS, the 1099-MISC and W-2 forms must be filed by January 31. Other 1099 forms are due by February 28, 2020.
Need to Catch Up with Your Accounting?
If you’re struggling to get your books caught up with this financial year, our accountants at Norton Financials can help. We can help prepare your documents for this new tax season and make sure that your books are caught up and accurate. To schedule a consultation with us, please give us a call today at (203) 988-6806.