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Friday, 9 October 2020

Tips to Close Your Accounting Books Effectively at the End of the Year


 

As a business owner, you always struggle to keep up your accounting books. Closing your accounting books can be stressful and time-consuming. However, if you have a monthly closing process and checklist in place, you can finish accounting tasks and reconciling accounts easily.


Are you worried about closing your accounting books? The following are the top tips to close your accounting books by the industry experts:

 

1. Chris Fletcher - Crest Capital 


"Before a business closes their books, they should make sure they've accounted for all equipment that could be eligible for the Section 179 tax deduction. This is especially important in 2020, as many businesses had to buy equipment like plexiglass shields, sanitizing stations, etc. Section 179 is excellent, and businesses should use it to its fullest."


2. Dawn Hatch - Founding Partner, MATAX Inc


  • Record all of your transactions, even out of packet/cash transactions; make sure you have receipts
  • Reconcile your account balances to bank statements
  • Review your Income Statement and Balance Sheet
  • Review your Accounts Receivable (open Invoices) to see what is collectible and what should be written off
  • Review your Accounts Payable and pay any late bills, log all that are not yet paid
  • If you paid any contractors, make sure you have W9s on file and file 1099s
  • If you have employees, review the W2s and make sure all paid commissions, bonuses, and benefits are included
  • If you have Inventory, do a count and make any needed adjustments in your accounting system
  • Make any needed accruals and depreciation entries
  • Lock you accounting file for the period to ensure no changes are made
  • Reflect on the year and plan for the year ahead

3. Sharon Means, CPA at Redmond Accounting Inc 


Make sure to reconcile your bank account(s) because unless cash is correct, you can't be sure all transactions have been recorded. Make sure that you review any items that are outstanding to determine if further research is warranted. Once you are sure of the bank accounts, you can continue to close your books.

 

Also, start collecting your W9’s from your contractors and vendors early to determine which are eligible for 1099-Mics reporting. If you start early, you will get to know if you need a W9 before the year-end. The contractors can deduct these expenditures and are responsible for providing receipts.

 

4. Justin Nabity, Founder and CEO at Physician’s Thrive


Closing your books at the end of the year is a customary task, and here are my top three tips for making the process more efficient:

 

  • Automate the process: Finance teams spend quite a lot of time on manual processes that could easily be automated. According to Ventana Research, companies using spreadsheets throughout the close process take 8.2 days (on average) to close their books; whereas, those with automation features for most of their closing tasks and using spreadsheets for complex work only take 6.2 days to close their books.
  • Invest in the right tool to increase collaboration, work efficiently, and ensure that the numbers are complete and accurate. RECOMMENDED TOOL: Adra is an excellent tool that helps us close faster, and we have tailored the software for our specific needs.
  • Keep track of invoices: Make sure that you have cleared your year-end invoices and make certain that all sent invoices have been remunerated. Use accounting software to keep all your digital and paper invoices in one place. (Paper invoices can be scanned and uploaded on the same software.) It’s very easy to lose invoices if not categorized and organized properly on time.
  • Monthly payroll expenses should match year-end ones: If your payroll expenses are not handled correctly, you can get in serious trouble with IRS. You need to ensure everything is in order before filing the annual IRS Form 940 and to reconcile the expenses for the year.”

 

5. Carol Tompkins, Business Development Consultant at AccountsPortal


1. Invoice all unbilled projects and orders, and send any unbilled invoices. This will help you ensure that all income and expenses for the year are recorded and up to date. Send reminders to customers with unpaid invoices to pay their bills, and make every effort to have these invoices paid by the end of the year.

 

2. Ensure that all of your expenses have been captured and categorized into your accounting software. With all your expenses properly captured, it becomes easier to identify tax-deductible expenses that the business qualifies for.

 

Business owners often don’t get enough time to review their accounting books, while many don’t have a dedicated department for the same due to budget restraints. Several established, new companies and small businesses are turning toward online bookkeeping services in such a situation. Yes, you get to focus on your business growth while your partner would take care of your books virtually, efficiently. In fact, many companies have taken their processes online amid this pandemic, where bookkeeping and accounting are the most common. You may also consider taking your business bookkeeping online to get accurate financial information about your business anytime, anywhere.