As December rapidly comes to an end, it’s time to get your books in order so that you can start the new year feeling confident and ready to tackle new business opportunities.
Here are 7 bookkeeping tasks that you should tackle at the end of the year:
Tidy Up Your Books
Now is the time to review your 2017 books to ensure that you have:
- Invoiced all your customers. Double check that you have invoiced all your clients for services provided during the year. Remember that the quicker you can invoice your clients, the quicker you can get paid. When creating your invoices be sure to include payment terms. Net 30 (meaning, your customer has 30 days to remit payment) is one of the most commonly used invoicing payment terms. You can also consider offering discounts to customers who settle their invoices early.
- 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 to them with a personal phone call or consider sending them a past due statement in the mail or via email.
- 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.
- Ensured that all expenses are recorded and that you have a handle on all your receipts. We recommend keeping copies of all receipts so that you can easily locate them when tax season rolls around. By reviewing your current year expenses, you might also be able to identify tax-deductible line items.
- 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 will be accurate and up-to-date. This will help you to make informed business decisions. At the end of each month, our banking specialists will also reconcile your accounts and send you an email with any questions regarding income and expenditures from the past month.
Consider Tax Implications of Big Year-End Purchases
Before making any decisions, take the time to review your financial statements, especially your statement of cash flows. If you have healthy cash flows, it might be prudent to make a large purchase before December 31st. By doing that, you can expense more of the value of equipment purchased this year for a bigger tax deduction.
Bonus depreciation is a method of accelerated depreciation which 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. As a result, bonus depreciation can be viewed as a valuable tax-saving tool for your small business.
Give to Charity
Becoming a charitable business offers so many benefits. It can help you to boost employee morale, cultivate a positive brand image … and 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.
Even if you don’t sell products, it’s always a good idea to take stock of inventory as the year comes to a close. This should include keeping a record of office supplies, furniture and equipment such as computers.
If you exceeded the IRS’ threshold of $600 in cumulative payments to independent contractors for that tax year then you must complete Form 1099-MISC Reporting for Nonemployee Compensation which is due by January 31st. As a best practice, you should collect W-9 information when you begin an engagement with an independent contractor. Examples of contractors include web designers or virtual assistants.
Thank Your Customers
While this isn’t an actual bookkeeping or accounting task, it is important for the long-term viability of your small business. There are many options to show your customers that you appreciated their business this year and look forward to meeting their needs for another 12 months. You don’t have to spend a lot in order to say “thank you”. Even sending holiday cards can go a long way.
Create a Budget for the New Year
You should not wait until the first week of January to create your budget; we recommend that you get started 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
In creating your budget, it is always best to be conservative and to consider market trends as well as the trajectory of your brand and its reputation in the industry.
Bonus: 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.
By outsourcing your bookkeeping needs, you can transfer these critical tasks to a team of experts, thus freeing up your time to focus on value-added activities such as building better client relationships, exploring new partnerships and expanding your business.
As your business grows and your needs change, RQB will help customize the scope of work you require and tailor solutions to fit your budget. Leveraging our scalability means you get to save the time – as as well as the cost and hassle of adding in-house personnel. In turn, you can use the additional time and money to gain a competitive edge and scale your own business seamlessly.
The RQB team wishes you a happy and prosperous 2018!
Please reach out to us if there is anything we can do to help you reach your financial goals.