This past winter I was taking a class with 29 other small business owners. I was having a conversation before class in early April with a CPA and one of our classmates walked up and said, "I bet you guys are psyched for taxes to be done." We both said yes and kind of laughed. Then we started talking again and mentioned to each other how accounting never really slows down. Just because tax season is over doesn't mean that accountants suddenly have nothing to do.
Bookkeeping Is Constant
No matter what date is on your calendar there are bookkeeping tasks for every part of the year. If you are using your bookkeeping system as a tool to help you run your business then you are updating it regularly. If you are serious about having a solid bookkeeping system I would recommend updating it at least once per week. However, if you only need to look at reports once a month then you can certainly knock out all of the bookkeeping in one shot. When you update your bookkeeping you need to be sure to reconcile your QuickBooks file every month. Reconciling all of your accounts is the only way to know if you have accounted for every transaction. Whether or not you have coded each transaction appropriately is a different story, but that is where your accountant can help out.
During the summer each year we get an influx of new clients that need bookkeeping help because they filed for a tax extension. They seem happy and content that they have filed for an extension. I imagine that many people do not know that they are accumulating interest and penalties with each day that passes. A tax extension does not exclude you from penalties and interest; it only extends your filing date. When filing a tax extension your tax payment date remains the same so you still have to pay penalties and interest. If you are keeping up with your bookkeeping and having regular meetings with your CPA you should never even think of filing a tax extension.
The summer months are a great time to review your financial reports. You should be reviewing your business finances at least once a month if not more. However, every once in a while you should be going through any questionable accounts or transactions. Take the time to review and clean up your ask my accountant QuickBooks account. Having your CPA review your QuickBooks file half way through each year or after each quarter is a good idea. That will allow you to address any issues with your CPA, which will make year-end tax preparation and tax filing a breeze.
Financial Forecasting and Budgeting
I like to attend to financial forecasting and budgeting prior to the end of the year. I think starting on your budget and forecast sometime in October or November makes the most sense. I like to have my budget completely finished by mid-December so I can rest easy and enjoy the holiday season with my family. Don't go through all the trouble of creating a forecast and budget and then never look at it again. Make sure to enter your budget into QuickBooks before the end of the year. Once your budget is entered into QuickBooks it is easy to run a budget vs actual report to make sure that you are staying on track with your goals.
Year-end Tax Review
One thing I always stress to clients is to have a year-end tax review with their CPA before the end of the year. In early December I like to wrap up my November books and financial reports as soon as possible. I then schedule a meeting with my CPA to go over my current situation. I get two major things accomplished in my CPA meeting. First, I get all of my questions answered and review any questionable transactions on my books. Second, I get a solid tax estimate of what I will owe or be refunded. I can then make any last minute tax advantageous moves before year-end. Additionally if I am going to owe money at least I will have four months advance notice rather than just a few weeks. Having a tax review with your CPA prior to year-end is probably one of the most crucial financial tasks of the year, but also the most skipped by small business owners.
As you can see accounting does not slow down after the tax deadline. In fact for us bookkeepers taxes really don't cause a whole lot of extra work. We constantly keep up on the bookkeeping for our clients so that filing taxes is simple. Closing out the year is as simple as closing out December; it's just another month to us.
Photo Credit © Dollar Photo Club / Dmitry Ersler