How to Keep Your Books in Order at the End of Fiscal Year

Every business owner who wants to play it by the rules knows that the end of the year is an excruciating period. There are many accounting bases to cover in order to keep your finances in order. This is extremely important for two major reasons.

On the one hand, the tax authorities will conduct a thorough analysis to see whether your financial reports and the details of the tax return match.

On the other, it’s imperative to do your accounting homework for the benefit of your own business management in the future.

So, here are some helpful accounting guidelines for the end-of-the-year reports

Ironing out the bank statements

If you’re using one or more accounting software tools, there might be some differences between the software tracking and your bank accounts.

These discrepancies can become a significant issue at the end of the fiscal year for several reasons.

For starters, you won’t be able to identify the exact amount of money you can count on for your future investments. This lack of accurate data could lead to making a bad business plan for the next business year.

Further, not ironing out your bank statements might keep some unpaid invoices or uncashed checks concealed from you.

Finally, you could get penalized by the tax authorities if you fail to provide the exact data regarding your accounts and books.

Most modern software bookkeeping tools can be easily connected with your bank accounts. These options will simplify the entire process of reconciling your bank statements and keeping them in order all year long.

Evaluating your inventory assets

The end of the fiscal year is the right time to ask for tax deductions. Still, you’re not eligible to file an official deduction request if you don’t list the deductible items.

Because of that, it’s crucial to evaluate your inventory at the end of the year.

Every single asset you’re using loses the value of a course of time. These value drops can be used to get deductions. For instance, if your computer is long in the tooth, you could get some tax benefits for that matter.

That’s why you should first conduct a stock-take analysis. After you’ve noted down all the items you have in your office, you’ll be able to see how many of them don’t have any market value anymore. If a business item or device is outdated and can’t be resold, you have the right to demand additional tax deductions.

Apart from that, it’s good to get familiar with the condition of your inventory so as to make a plan for getting new equipment and software tools. These items can take a substantial part of your budget for the following year, so make sure to check your inventory on time.

Delving into the unpaid invoices

Being tolerant towards later payers is an integral part of every business management. Still, this tolerance should never be applied to all your clients and all their payments. To paraphrase Abraham Lincoln: You can wait for some people to pay you for some time, but you can’t wait for them all the time.

If you don’t take a plunge into the unpaid invoices and late payments before the year ends, your books will be a real mess.

In order to avoid this havoc, think about using automatic reminders for late payers. For instance, you can schedule these messages to be sent once a week. This will yield a two-fold benefit: you won’t have to contact each and every late payer manually, and your financial books will be kept in order.

Also, one of the ways the invoicing and payment process is to start using online invoices as much as possible. These forms will make payment easier for both entrepreneurs and their clients.

What you need to be aware of is the fact that some clients won’t pay you in spite of these automatic reminders. In that case, you can write off one part of those debts – for instance, minor sums that aren’t worth wasting time on chasing those clients – or schedule those payments for the following year. That way you’ll realize what assets you’ve got at your disposal and which ones you can count on for your new business budget.

Tracking your expenses

Every balance sheet needs to contain accounts payable and accounts receivable. While we’ve discussed the latter in the previous paragraphs, it’s also important to take care of your accounts payable, i.e. the expenses your business has in one year.

The most practical thing to do if you want to keep those expenses under control is to conduct monthly analyses.

However, if you don’t manage to write down and calculate your expenses as time goes by, you can still save the day with some simple steps.

First and foremost, put together all the bills and checks you received from your suppliers and vendors. You can use a plethora of apps to record your receipts and later categorize them in accordance with your needs. For instance, you can group them by vendors that issued them, by dates, by amounts of money, etc.

Another great advantage of these software tools is that you can just take photos of your bills or simply scan them and add them to your accounting tool(s). However, throwing away the printed bills and checks isn’t a good idea, because some tax authorities might want to take a look at those tangible documents.

What’s also important when you’re categorizing your expenses is to separate the business-induced expenses, since some of them are tax deductible. In addition to the abovementioned office equipment that has no resell value, you can also claim tax deductions on tickets for business trips and events, as well as any other core business cost.

Conclusion

When you’re getting ready for the end of the financial year, it’s important to leave no stone unturned when it comes to your annual reports. From your payments and inventory items to bank statements and unpaid invoices, it’s important to put all these features in order and keep your small business organized. By doing so, you’ll thoroughly prepare your business for the new fiscal year and meet the demands of the tax authorities when it comes to proper bookkeeping.

Mark Thomasson
Mark is a biz-dev hero at Invoicebus - a simple invoicing service that gets your invoices paid faster. He passionately blogs on topics that help small biz owners succeed in their business. He is also a lifelong learner who practices mindfulness and enjoys long walks in nature more than anything else.
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