We've stated it before and I'm going to state it again, year-end bookkeeping should not exist.
All of us here at Salt Lake City Bookkeeping treat 12/31/13 simply as another month to close the books for our clients. The critical task at year-end for us is just a review with the owners before we submit the books to the respective CPA for filing taxes. Think about it, you wouldn't submit a paper to your professor without looking it over, we're humans and we all make mistakes. The critical reviewer though happens to be you the business owner. Without your help we won't have the necessary tools to achieve a financial nirvana of sorts to close your books out for an entire year. Here are four roadblocks that we usually run into at year-end.
1.) Respond to Inquiries Promptly - Along the way while doing your books we have questions. We ask a lot of questions but they usually breakdown into a few very basic generalizations. One, we usually ask what a specific charge was for or where a specific deposit came from. These are necessary questions that need to be answered. I don't care if you took FiFi down to the vet and had to use the company card, I'll code it appropriately. Two, if I need a statement demand your bank to provide it. These are financial documents that I need in order to back up the integrity of your books to the IRS. Lastly, don't guess, put some hard thought into a question when I have it. Most of the time I'm able to talk it out with the owner and we're able to come to a resolution for the answer
2.) Request To Fully Review the Books - You must request to review the P&L and Balance Sheet. Even if you don't know how these work or what they do. If you don't understand them we can first explain how you can use these as financial tools for your business. Once we've explained these accounts to you we can dive into them to get the specifics ironed out and 100% correct. This isn't a long process so fear not. Clients that even do over 10,000+ transactions a year can be reviewed in under 30minutes.
We'll begin by reviewing your channels of income and expenses on your P&L for accuracy. Then dive into your balance sheet to ensure that you currently hold the assets the books show you hold and the liabilities that you currently owe.
3.) Talk To Your CPA NOW - This is a critical year end process overlooked by most and is definitely a 'must do now' year-end bookkeeping task. By talking to your CPA now before the year closes you will...
- Understand what your tax liability is well before tax is due in March. Who enjoys being told they owe thousands of dollars tomorrow?
- Make tax advantageous moves now before it's too late in the new tax year
I've actually been yelled at before because a company has had to owe thousands of dollars immediately. It's definitely not my problem you've failed to talk to your CPA, it's yours.
4.) Ask the Right Questions - Be critical of your bookkeeper. If you think an expense
account looks inflated ask them why you've spent that much. Request to review your draws & contributions to the business. Dive into your loans, do these match what they bank has told you owe? How about accounts payable, if you see an old bill from months ago question them as to why it's still outstanding. Look at the reconciliation amount as of 12/31/13; does this match to the penny? If not, you probably have a bigger problem than asking the right questions at this moment in time.
Don't get me wrong, year-end is stressful even if you've done everything right and planned the best you could. A lot of different parties are requesting information from you. Your business might be facing a large tax liability that you weren't fully expecting. I mean seriously, think about it, Christmas and New Years in one week? I love my extended family but the idea of seeing all of them, planning dinner, and hosting at my house is stressful enough. However, if you just request to sit down with your bookkeeper for even 2hours at year-end I guarantee you'll see dividends paid back.