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Friendly reminder: we’re quickly approaching December 31st. You have a full month left to make decisions that will significantly affect your business for 2021 and beyond. These 3 year-end tasks will boost your business and make your accountant happy.
Whether you’re racing to finish projects, comfortably coasting towards January, or a little disoriented about what you’re supposed to be doing, follow these steps and make your transition from 2021 to 2022 smooth.
Photo By Kelly Sikkema On Unsplash
#1: Organize, Reconcile, and Review
Good decisions require good information. Before anything else can be done, you need to understand your finances year-to-date. Receipts and reports might not be the most exciting parts of business, but they’re arguably some of the most important.
Maybe this seems basic, but make sure all your transactions are recorded correctly in your accounting software. A stack of deposit slips in your car isn’t helpful without corresponding transactions. If your “Ask Accountant” or “Miscellaneous” expense accounts are overflowing, enter everything you can into the proper category.
No matter whether you operate on cash or accrual, know the balances of your outstanding bills and anticipated expenses. What must be paid before December 31st? What do you plan to pay before December 31st? What could you pay before December 31st? Three similar categories with very important differences.
Once everything makes its way to the computer, it’s time to reconcile. True story: no one really likes to reconcile their bank and credit card statements. But, we’re business owners and it has to be done. Sit down and get caught up. Reconcile your bank statements. (Remember, bank employees are human too and sometimes you catch a mistake.) Reconcile your credit card statements. Split your transactions into the correct categories, and file your receipts. **Bonus points if you start a file for the capital purchases and charitable donations your accountant will need at tax time.
Create basic accounting reports: income statement, balance sheet, and cash flow statement. Run your reports to show 2021 year-to-date information first. This is where you currently stand before making year-end adjustments and decisions. Now, run the same reports comparing 2020 and 2021 year-to-date and your 2020 fiscal year. Knowing what you expect in revenue and expenses during December, estimate your 2021 profit. Are you where you expected to be?
Photo By Persnickety Prints On Unsplash
#2: Call Your Accountant and Plan
There’s a reason we hire accountants – it’s their job to help us make good decisions because it’s also their job to understand finances and the endless maze that is tax code. A good accountant wants to help your business be as successful as possible. If your accountant doesn’t seem interested in helping you be successful, find a new accountant.
Before you make any big decisions, call your accountant if you haven’t already. Ask them to review the reports you just created and talk with you about the best ways to meet your goals and what actions they recommend before December 31st.
Here’s a list of questions to start.
Should I buy more inventory or assets before year-end? (Think before you buy!)
How can the donation I want to make to my favorite organization best benefit them and me?
Are there contributions I should make to my retirement or health savings accounts?
What information do you need me to collect before December 31st – vehicle mileage, W-9 information, inventory values, etc.?
**Special note: Accountants specialize in different fields. Know who you’re working with and their specialty. You may need different people for different tasks. It’s ok. If they’re a true professional, they’ll understand and refer.
Photo By Amy Hirschi On Unsplash
#3: Complete Year-End Tasks by December 31st
None of this works unless you do. Go back and do any of tasks above that you didn’t think were important. Put your accountant’s advise to work. If you have ARs to collect – get your money. Maybe you decided to purchase equipment this year – order it asap! If you’re where you want to be, congratulate yourself and start working ahead on collecting information to get your taxes at the front of the line.
December 31st is a real deadline, but you have plenty time to complete these 3 year-end tasks and enjoy the benefits. Don’t wait until January and miss out.
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