According to information from the Bureau of Labor Statistics, there are more than 1.3 million certified accountants in the U.S. Even if you are not one of them, you can still lose a few things from these dedicated professionals.
As a business owner, you have a lot on your plate. This includes handling your business’s books, revenue recognition issues, taxes, and more. When the end of the year arrives, and you are ready to close the books, there are a few things you need to keep in mind. Keep reading for some helpful tips with this process.
Get Things Organized
Just like with any other job, you must get in the right mental and physical space before you start working on your books. This includes clearing your space of any distractions. It has been scientifically proven that when you have a clear space, it leads to clear thoughts, and fewer distractions will improve your productivity.
Make sure you take some time to gather yourself before starting this work, too – it can be tedious. This may include listening to your favorite song or just taking a minute to meditate to clear your head. Once you have done this, you are ready to get to work.
What Does Closing the Books Actually Mean?
Now that you are organized, and your mind is clear, it is time to get started. Closing the books is the term that refers to the steps you follow to wrap up your business year on the fiscal level. Keep reading to learn how to do this properly.
Handle the Invoices
One of the most important things you should do when closing the books is to ensure all your invoices are up to date. If anyone has purchased something from your business, you should send them an invoice, and you need to do this right away. If you fail to do this, your clients and customers do not have the required information for their own taxes or closing their own books.
Manage Your Expenses
The next step is for you to figure out what is going on in relation to the business’s expenses. You have probably been recording your costs throughout the year, which is helpful. However, if you have forgotten to record some, that is fine. This just means that there is a little bit of extra work you have to do now. Putting all your expenses in the bookkeeping software that you use is essential to help your accountant find any tax cuts your business should receive.
You must take time to separate your business and personal expenses, too. This is essential because if you do not do this, you may face an audit from the IRS. Smaller expenses may be deductible; however, your personal ones are not. It would help if you never gave the IRS any reason to be suspicious of you or your business.
Pay Any Outstanding Bills
This next step is clear and to the point. You need to pay any bills that your business has due before the end of the year. Remember that you must pay bills from your contractors, vendors, and anyone else that you have these from. If you do not remember how much you owe, be sure to check your records or get in touch with the person or company you owe.
Update Your Accounts
After paying all your bills, go ahead and update your accounts. This means you must reconcile your business’s bank accounts. Make sure the expenses and income that have been recorded in the accounting program match your official statement from the bank. If you do not do this the right way, it can cause a lot of issues since you won’t know how much money you really have.
You should also ensure your fixed assets have been updated. Also, add any new ones that could have been left out during the busy year.
Consider Employee Bonuses
At the end of the year, many businesses give their employees bonuses. You must decide what you will give – if anything. There are several ways to do this, so you will have to decide what works for you, your employees, and your business.
Get Help Closing the Books
If you do not have the time or the ability to handle this process on your own, it may be smart to engage the services of the professionals. An accountant can help ensure that all your financial “ducks” are in a row and that everything has been taken care of as one year ends and another begins.