Getting your books in order is especially important as the year draws to an end. Organized books help small businesses feel confident and ready for new business opportunities in the new year. What tips do you need to know to properly get your books ready for 2022?
This blog is an excellent starting point! In the following content, we’ll explore 7 bookkeeping tips for small businesses to keep you organized for end-of-year bookkeeping, setting you up for a successful new year.
1. Tidy Up Your Books
Now is the time to review your 2021 books! While doing so, make sure that you’ve completed the following tasks.
- Have you invoiced all your customers? Check (and check again) that you invoiced all your clients for services provided during the year. If certain invoices have not been sent out, don’t wait any longer to bill your clients! Typically, the sooner you invoice your clients, the sooner you get paid. While creating your invoices, be sure to include payment terms. Net 30 (i.e. your customer has 30 days to remit payment) is one of the most commonly used payment terms. You may also consider offering discounts to customers who settle their invoices early. Regardless of payment terms, make sure you receive all due payments before the end of the year to best set your business up for success in 2022.
- Have you followed up on late payments? If your accounts receivables line item is particularly high, there’s no better time to follow up with the clients who have outstanding invoices. You can choose to reach out with a personal phone call, or consider sending them a past due statement in the mail or via email.
- Have you updated all vendor files? Have all your accounts payables been recorded in your accounting software platform, such as QuickBooks? If not, be sure to update this information. While you’re at it, check that you do not have any outstanding vendor invoices.
- Are all your expenses recorded? Do you have a handle on all your receipts? We recommend keeping copies of all your receipts so you can easily locate them when tax season rolls around. By reviewing your current year’s expenses, you might also be able to identify tax-deductible line items. Receipts are physical proof that business-related expenses are accurately labeled as such.
- Have you reconciled your bank accounts? At Remote Quality Bookkeeping, our banking specialists will update all of your bank accounts and credit cards in QuickBooks once per week as part of our bookkeeping services. These weekly cash reconciliations ensure that all reports are accurate and updated, which, in turn, will help you make informed business decisions. Additionally, at the end of each month, our banking specialists will reconcile your accounts and send you an email with any questions regarding income and expenditures from the past month. If you are not outsourcing these tasks to bookkeeping professionals, ensure that they are taken care of internally.
2. Consider Tax Implications of Big Year-End Purchases
Before making any significant year-end decisions, review your financial statements, especially your statement of cash flows.
If you have healthy cash flows, consider making a large purchase before December 31st. By doing that, you can expense more of the value of equipment purchased during the year for a bigger tax deduction.
Bonus depreciation is a method of accelerated depreciation that allows a business to make an additional deduction of 50% of the cost of a qualifying asset in the year in which it is put into service. Bonus depreciation can be viewed as a valuable tax-saving tool for your small business.
3. Give to Charity
Becoming a charitable business offers many benefits. Giving can help boost employee morale and cultivate a positive brand image. The tax break doesn’t hurt either. Keep in mind that the IRS “limits the amount of charitable donations that can be considered tax-deductible to 50 percent of your adjusted gross income.” Your charitable donation must be settled in full by the end of the tax year and reported using Form 1040, Schedule A.
4. Take Inventory
Even if you don’t sell products, it’s always a good idea to take stock of your inventory as the year comes to a close. This should include office supplies, furniture, and equipment, such as computers.
5. Collect W-9s, 1099s, and W-2s
If you exceeded the IRS’s threshold of $600 in cumulative payments to independent contractors for that tax year, then you must complete Form 1099-MISC Reporting for Nonemployee Compensation, due by January 31st. As a best practice, you should collect W-9 information when you begin an engagement with an independent contractor, such as a web designer or virtual assistant.
Form W-2s are required to report compensation paid to employees throughout the year. This compensation includes annual wages, tips, etc.
6. Thank Your Customers!
While this isn’t an actual bookkeeping or accounting task, it’s important for the long-term viability of your small business. You can show your customers that you appreciated their business this year and look forward to meeting their needs for another 12 months.
Keep in mind, you don’t have to spend a lot to say, “thank you.” While some businesses enjoy sending exorbitant gift baskets to their customers, a simple holiday card goes a long way as well.
7. Budget for the New Year
Don’t wait until the first week of January to create a budget. We recommend starting today. Ideally, you will want to set up an annual budget, separated by month. Your budget should take into consideration the following estimates:
- Day-to-Day Expenses
- Capital Expenditures
When creating your budget, be conservative, and consider market trends as well as the trajectory of your brand and its reputation in the industry.
Bonus Tip: Consider Outsourcing Your Bookkeeping Needs
Back office functions like managing receivables and payables, bank reconciliation, and payroll are essential. But they take a significant amount of time away from your core business. If you would like to focus more on strategic, revenue-generating activities in the new year, then it’s time to consider outsourcing.
Outsourcing your bookkeeping needs involves transferring these critical tasks to a team of experts, freeing up your time to focus on value-add activities such as building better client relationships, exploring new partnerships, and expanding your business.
As your business grows and your needs change, MyRQB will help customize the scope of work you require and tailor solutions to fit your budget. Leveraging our scalability means you get to save time – as well as the cost and hassle of adding in-house personnel. In turn, you can use this additional time and money to gain a competitive edge and scale your own business seamlessly.
Please reach out to us if there is anything we can do to help you reach your financial goals. The MyRQB team wishes you a happy and prosperous 2023!
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