End of the Year is Around the Corner – Time to Get Ready!
Guest Author: Roxanne Brown, CQA
It’s hard to believe another year has all but flown by! Each year it seems as if time goes by faster and faster, and I hear from clients who want to get a head start on their tax preparation so they don’t have to file another extension. The end of the year is always extremely busy for eCommerce business owners in particular it seems, and adding the accounting tasks can make it seem almost overwhelming – which leads to extensions. So let’s take a look at a few things you can start now to make it a little easier and less stressful.
- Do you have all of the information to complete 1099’s for your subcontractors? The IRS requires that you issue a 1099 to any subcontractor that has been paid $600 or more in a year. If you haven’t already requested a W-9 from them, now is the perfect time. In QuickBooks you can run a 1099 Detail Report by going to Reports>Vendors & Payables and select 1099 Detail. The report will help you verify the information that QuickBooks will print on the 1099-MISC tax form, as well as what is missing. Of course if the report comes up blank, then you know you need to assign the 1099 account(s) and tag your vendors.
- Have you reconciled all of your credit cards and bank accounts? Including PayPal? If not, now is a perfect time to get caught up so you only have to reconcile December once the statements become available in January. Don’t forget to verify and reconcile your Petty Cash account!
- Review your Accounts Receivable account and decide if any of these will need to be written off.
- Review your Accounts Payable account for accuracy and pay any bills that would normally be paid the first few days of the month. REALLY look at this account; so many times I review books that show payables due that were already paid! Just as you don’t want income overstated, you also don’t want your costs overstated.
- Have you been adjusting inventory throughout the year (possibly doing a rolling count)? If not, it’s a good idea to start this process now, that way when you do the full end-of-year physical count there hopefully won’t be any nasty surprises. A good practice is to have something counted every day, every week, or whatever schedule works for your environment. By the end of the year you will probably cycle through your entire inventory at least once, without having to close the business to do so.
- Have you recorded any large purchases correctly? Do you have any balances that look ‘odd’ – specifically look for balances that stand out or don’t ‘feel’ or look right. Click into the report and review the numbers that are making up that balance.
- Review your Profit & Loss and Balance for the year-to-date, but also look at them compared to the prior year. You might be amazed at how beneficial it is to look at last year compared to this year; many times this is how oversights are caught. One of the best tips I can give you is to run your P&L and Balance Sheet reports compared to last year ….if you do nothing else on this list; do this! Look at the Profit & Loss filtered by Month; you can easily spot accounts that seem too high or too low.
- Are you planning any new equipment or software purchases are in the near future? If so it might make sense to purchase before the end of this year instead of putting it off. Also look at your typical end-of-month expenses (subscriptions, office supplies, etc); for many businesses it makes sense to incur these expenses before the year ends.
- Schedule a meeting with your tax preparer to review your current books; the time for tax planning is before the end of the year!
- If you are using any third party programs (such as Monsoon Stone Edge https://www.stoneedge.com/ ) make sure you generate, and save, all end of year reports in a timely fashion. Many programs do not have the functionality to pull ‘as of’ reports at a later date, and this can cause a real headache if you didn’t create a back-up of the program or pull the reports. It can be a real shock to find out that you don’t know what your 12/31/2012 inventory value was because you cannot pull that report in March!
- Make a back-up of any sensitive programs and append the date and store off-site. An example would be Monsoon Stone Edge; add ‘EOY_2012_Do_Not_Delete’ – and store it on removable media outside of the office. Definitely back-up your QuickBooks. Also – VERIFY the back-ups are good! Restore the back-up(s) before you file them away. One of the worst things is depending on a back-up, only to find out it’s no good or corrupted!!
- Once everything is posted & confirmed in QuickBooks, and the taxes are complete – enter a closing date and password on your file. It is way too easy to post or change information in QuickBooks in the prior year; which will drive your tax preparer up a wall Not to mention it will cost you more next year! To do this, go to Edit>Preferences>Accounting>Company Preferences tab.
- If your tax preparer doesn’t actually work in your QuickBooks file, then ask them for the end-of-year adjusting entries so you can enter them.
The above list may not contain everything you need to do, but it will certainly give you a head start. Even if you pick one or two things from the list it will make life easier when tax time rolls around.
Bonus Tip: Did you know that QuickBooks has a built-in ‘Year-End Guide/Checklist’ within the program? Most people do not know that this feature exists, even though it contains a lot of great information. Since QuickBooks does not actually require the user to close the year, many users never give this a second thought. Go to the Help menu and select the ‘Year-End Guide.
Bonus Tip #2: Now is the perfect time to watch for QuickBooks 2012 to go on sale. Intuit has a promotion that if you purchase 2012 you will receive 2013 automatically. Personally I would say 2012 is great to upgrade too, however I wouldn’t recommend installing 2013 at this point. I don’t know how long they will run the promotion, but either way – look for a good deal on the 2012 version.
Have a great day!