ARE YOU PREPARED FOR YEAR END?
We’re officially two months away from the end of 2023, but when you factor in holidays like Thanksgiving, Diwali, Hanukkah, Christmas, and Kwanzaa, it really feels more like two weeks away, if you ask us. So let us ask you… Are you ready? Do you know the status of your books? Do you have a handle on your financials? Are you prepared for January’s sales tax and 1099 deadlines?
👋 Hi, Taylor here at Accounting Therapy, and in my experience, getting ready for year end and starting the preparation process now can save you, your CPA, or your bookkeeping team a lot of headaches in the coming months. And maybe even more importantly, it can save you from any surprises.
Now, don’t get me wrong; I love a good surprise. For example, if you want to surprise me with a last-minute trip to a tropical paradise, please be my guest! But surprise me with an unexpected tax bill…? Um, no thank you! Unfortunately, dear readers, that’s exactly what can happen when you're unprepared for year end. Please allow me to share my own personal story to illustrate.
In my previous life, running an apparel wholesale company, this exact situation happened to me – the surprise tax bill, not the tropical vacation. Our CPA was so used to us either not making money or not having updated financials (this was before we enlisted Accounting Therapy as our bookkeeper) that he either forgot to check in or simply didn't because he knew we couldn't provide accurate reports. Well, one year we did make money, and quite a lot of it, or at least that’s what the P&L said. Yay, right?! Our thoughts exactly, until the unexpected tax bill came, then not so “yay”.
For a brief moment, I wallowed in the fact that we owed taxes, but then our CPA told me that if I ever complained about making money again, I’d be fired. Point taken. But also, lesson learned. Had we been more proactive in maintaining updated financials and more communicative with our external financial team, we could have planned for this. We could have saved. We could have cut unnecessary cashflow expenses. We could have been prepared!
So, if I could go back and do it again… what would I do differently? I’m so glad you asked, let me tell you!
- Get in the Right Accounting System!
Why didn’t I have a bookkeeper in the above scenario? Because I was using software that was installed on one measly computer, completely siloed in my home office. It wasn’t until I met Alexis and the Accounting Therapy Team that I was introduced to QuickBooks Online which made me realize there was a whole new world out there. I could invite my CPA to remotely access my financial data at their leisure. I could hire a bookkeeping team to support me without them having to be at my home office. My business partner and I could be in our QuickBooks, get this, at the same time. It was downright magical!
There’s a myriad of reasons why you may be working with the wrong software. Maybe you relate to the above, or maybe you don’t. Maybe you need to track inventory quantities but can’t. Maybe you just opened a second location and don’t know how to allocate expenses by store. Regardless of the reason, if you feel like your software is leaving things to be desired, it probably is. The solution? Have a conversation with someone who knows the software options, can assess your needs, and make a recommendation. (Psst, we can do that🙋! Click here for more info.)
- Keep your financials up to date!
Why weren’t the company’s financials up to date? So. Many. Reasons. 😵💫
- I didn’t know what I was doing. I didn’t understand what a bank reconciliation was or what an uncleared transaction was. If the bank account balance in the QuickBooks file didn’t match what was in the bank… I’d spend HOURS trying to figure it out. Newsflash people: it doesn’t have to match… well, within reason, but that’s a topic for another day! The point is I was making a mess and didn’t feel successful. I needed some serious training, or at the very least, some serious help.
- I didn’t have time. I was so busy doing the work that kept the business afloat and moving forward, updated and accurate financials be damned! I didn’t realize that having accurate financials and understanding them could help me run the business better, make better decisions, and stay afloat longer.
- It took me forever! Because I didn’t know what I was doing and didn’t make the time to do it, by the time I had to do it, I’d have to block out three days to get caught up and without a doubt would always end up in tears of defeat because back to point #1, I didn’t know what I was doing.
If any of these situations sound familiar, please save yourself now! Outreach to our team. We can help you get back on track, get your books caught up, and get you on a regular schedule. Even if that schedule just means we’re your designated QuickBooks team to answer questions and help hold you accountable...after all they don’t call us accountants for nothing!
Having accurate and updated financials will relieve you from SO much stress, not only at year end, but all year round. When you need an influx of cash, when your CPA asks you for last quarter’s reports, when you are trying to get credit approval from a vendor, they all ask, “Can you send me your financials?” Being able to respond with a quick “yes” and send them over, I promise you, it’s like enjoying a hot cup of cocoa on a cold winter’s night. Absolutely dreamy.
- Understand what your financials mean.
If you’re thinking back to our last blog post recalling that we told you to do what you’re good at and this isn’t it, then good on you for remembering! We are not going back on our word, don’t worry. You don’t have to master this skill, but please find an individual or a team of people who…
- Understand your financials.
- Are invested in your business.
- Will put in the time & effort to ensure you understand your financials fully.
Before I had Accounting Therapy interpreting my financials in that apparel business, I didn’t understand why I would show $200k in profit and have no money to pay my vendors. I didn’t understand that having unsold inventory meant I didn’t show any of the related expenses. I didn’t understand what the heck a balance sheet was and why it mattered. Now I understand that a solid balance sheet is accounting gold and can tell you a lot about your business, including if you have unrealized expenses that could impact your bottom line (for better or worse, but at least you will know).
Getting a grasp on your financials can help you know when to take a risk, when to slow down, or when you may have a big tax bill on the horizon. So, we challenge you to ask for help. Ask your CPA or bookkeeper to explain them to you or if you are in need of a resource, ask us! Our goal is to save small businesses from financial insanity, and we’d love to help you next.
- Book time in advance with your external financial team.
To piggyback off the above notion of understanding your financials, book time with your external team to go through those financials prior to major deadlines. Whether that be your bookkeeping team or your CPA, get ready for yearend by keeping them in the loop. They can help you identify areas of concern or call out things that need to be handled before the clock strikes midnight on 12/31. Don’t wait till the busiest time of their year (cough-cough January – April) to get on the schedule, take the proactive approach instead and schedule that appointment now!
- Keep your documents!
Starting January 1st, you are going to start receiving all types of documents from your lenders, your merchant services processor, or even federal and state agencies. SAVE THEM. Put them in a pile, save them, and then proactively send them to your bookkeeping team. Most will have valuable information that your bookkeeper or CPA will need in order to tie out your books for year end. If your external team is not asking for these documents, you should be asking them why they aren’t, as they are necessary to ensure you have accurate financials.
- Be proactive.
There’s a whole slew of other things that need to happen to ensure a smooth close out of the current tax year, i.e. too much to cover in one singular blog post. But spoiler alert! We’ll be giving you free access to our best practice year end checklist in January, so keep an eye out! In the meantime, here is the highlight reel of things you can start reviewing now:
- Ensure you have updated W9 information for vendors who need to be issued a 1099.
- Verify sales taxes are being accurately collected and reported.
- Confirm payroll liabilities (you can find those on your balance sheet!) are reconciled.
- Review accounts receivable and accounts payable for accuracy and validity.
- Check that bank and credit card accounts are reconciled.
- Make sure transactions are properly categorized.
- Check to see if your accounting file is reconciled to your last tax return.
If any of these raise eyebrows or queue for red flags, it’s time to bring in an expert! Our team of bookkeepers can help you sort through this list now instead of waiting for January crunch time.Whew. There’s a lot to unpack here. If any of these areas are feeling overwhelming, intimidating, or like you down right want to hit the “unsubscribe” button. Don’t do it. Don’t find yourself in the same tax time pickle I did ten years ago and let’s get you set up for success now. ➡️ Schedule a call with your external team, and if you don’t have one, we’re here for you! Schedule a 15-minute meet & greet call with Alexis. She once saved my QuickBooks life as a small business owner, let her save yours, too!
Tick, tock my friends! 🕓