Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts in category Month End Bookkeeping Tasks

Year-End Bookkeeping Checklist

Box of ReceiptsWow, can you believe the end of the year is quickly approaching? To help get your books in order and ready to send to your tax preparer here is a year-end bookkeeping checklist to help keep you organized. Keep in mind that every business is different. This list is meant to provide you with a general idea of items to take care of before December 31, 2010. When in doubt or if you have questions, seek guidance from a professional who knows your specific business situation.

End of Year Bookkeeping Checklist:

  1. Get Organized: Find all of the receipts for any deduction you are claiming on your tax return. For me, this involves looking in my purse, on my desk, in my car, on the kitchen counter, etc. Keep in mind that no receipt equals no deduction. The best way to stay organized during the year is to enter your transactions into an accounting software, like QuickBooks.

    After collecting all receipts, look over your personal bank statements for any business charges you paid for out of your personal account. Do the same with your business bank statement, but this time look for any personal expenses paid out of your business account. Make a list of these transactions to give to your tax preparer.

  2. Reconcile Your Bank Account(s): Bank Reconciliations are a great tool to verify all transactions have been posted into your accounting software. This ensures your general ledger bank balance (the bank balance in QuickBooks) matches your bank statement. If not, fix any mistakes you discover in the process.
  3. Invoice: Have you invoiced all of your customers for work you’ve done and products you’ve delivered/shipped for the year? If not, get caught up on those invoices.
  4. Collections: Follow up with any customers who owe you money. Send them a past due statement and/or give them a call to remind them they owe you money. Now’s a great time to collect your receivables.

    Look through your accounts receivables. Are there any receivables that you are unable to collect that need to be written off your books or sent to a collection agency?

  5. Inventory: Verify your inventory balance is correctly reported on your balance sheet. The best way to do this is to have an accurate count as of December 31st. You’ll also want to verify that your inventory is valued correctly – determine if any inventory items cost more than they’re worth and need to be written down. Remember, your tax preparer is going to need the following in order to prepare your tax return: 1. Inventory balance at the beginning of the year (January 1st); 2. The cost of inventory purchased throughout the year; 3. The amount of inventory that was sold during the year; 4. The ending inventory balance as of December 31st.
  6. Fixed Assets: These are the larger purchases you made throughout the year (i.e. equipment, automobiles, furniture, computers, etc.). Do you still have all of the fixed assets that are reported on your balance sheet? If not, record the sale or disposal of these fixed assets. Don’t forget to verify the depreciation on your fixed assets as well (if you don’t know how to do this, contact your CPA. They will be able to generate a depreciation schedule for you). Make any necessary adjustments.
  7. Expenses and Accounts Payable: Verify all of your accounts payables have been recorded in your accounting software, such as QuickBooks. Now’s a great time to make your 401(k), SEP IRA, and Simple IRA contributions, if you have not done so already.

    If you are a sole proprietor or a small business, did you know your cell phone charges and internet usage for your business is deductible on your tax return? Collect your cell phone bills & internet bills for the year and determine what percentage of your cell phone calls were for business purposes and what percentage of your internet was used for business. Make a list to give to your tax preparer.

  8. Notes Payable: Verify your notes payable (i.e. loans) amounts on your balance sheet match the statements from your banks. Are you missing any notes payables? Do you have any notes payables that you paid off during the year or debts that were forgiven? Make any necessary adjustments. Not sure how to make the adjustments? No worries, make a list to give to your tax provider or contact a CPA to help you make the necessary adjustments.
  9. Mileage: Great news, you can deduct $0.50 per mile for business miles driven in 2010. That means any trips to clients or for meetings are deductible. I keep a mini notebook in car to track all of my business mileage throughout the year (date, purpose of the trip, starting odometer reading and ending odometer reading) to ensure I have the necessary documentation to claim the mileage deduction. There are also a few apps out there that can track your mileage for you. Please note that your daily commute does not qualify for the deduction.

    The IRS also gives businesses the option to calculate the actual costs of using your vehicle (i.e. gas, maintenance, repairs, etc) rather than using the standard mileage rate. If you decide to go this route, you will need to determine the percentage of time you use your car for business and use this percentage to calculate your deduction.

  10. Collect W-9’s: If you have not collected W-9’s from your vendors and/or contractors you paid $600 or more to throughout the calendar year, now’s a good time to collect those. Don’t forget your 1099’s are due on January 31st. Speaking of 1099’s now’s a good time to order your 1099’s. They can be purchased at most office supply stores (Staples & Office Max) or you can order them for free from the IRS (irs.gov).
  11. Payroll Taxes: Verify your payroll tax liabilities match your quarterly payroll returns.
  12. Double Check your Profit & Loss: After making all of the adjustments listed above, double check your P&L Statement (aka Income Statement). Do your income and expense numbers make sense? Compare your profit and loss statement against prior years and against your budget. Think long and hard to make sure there is no additional income you are missing (i.e. advertising income from your blog, any contract work you did, etc.) and no additional expense items you are missing (i.e. those missing receipts you’ll find at the bottom of your purse or in your junk drawer). Make any necessary adjustments. Remember, no receipt equals no deduction.
  13. Create a Budget for Next Year: See our previous blog entries about creating budgets:
  14. Back Up: Back up your Quickbooks file to protect you from loss of data.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


Month End Bookkeeping Tasks

Shoebox Accounting Month End BookkeepingClosing your books every month is an important bookkeeping task that should be part of your monthly bookkeeping routine. By closing your books on a monthly basis will help you have cleaner books, be more organized, and you will have an easier time preparing your books to give to your tax preparer at the end of the year. Here is a 12 Step process to follow when you close your monthly accounting records.

  1. Accounts Receivable
      Verify all clients have been invoiced for work completed during the month.
      Double check your deposits and monies received have been posted to QuickBooks.
      Reconcile your Aging Accounts Receivables report against your Balance Sheet and against your General Ledger. Make any changes or adjustments to ensure all records match.
  2. Accounts Payable
      Make sure all bills have been paid.
      Double check all automatic bill payments and any recurring payments have been posted to QuickBooks (example – loan payments, monthly car insurance payments, etc).
      Post any outstanding bills to Accounts Payable so you can track what needs to be paid next month.
      Reconcile your outstanding vendor bills and vendor statements against your Accounts Payable Reports and your Balance Sheet. Make sure your records match those of your vendors. Make any adjustments or changes.
  3. Monthly Reconciliations
      Reconcile Bank Accounts – Reconcile all bank accounts using your monthly bank statements and monthly credit card merchant statements. Print and file the reconciliation reports and bank statements when finished.
      Reconcile Loan Balances and Lines of Credit – Reconcile your loan balances and lines of credit against your monthly statements. Print and file the reconciliation reports.
  4. Track your Fixed Assets
      Record your monthly depreciation.
  5. Prepaid Income and Expenses Adjustments
      Record your monthly journal entries to allocate your prepaid income and expenses.
  6. Write Off Bad Debt
      Write off any uncollectable invoices to bad debt. In QuickBooks, this can be done using a Credit Memo.
  7. Verify all Checks and Invoice Numbers are Accounted For
    Checks and Invoices are generated in numerical order. If any check numbers or invoice numbers are missing, figure out why and record the missing transactions. If they were voided or deleted, make sure you keep a record as to why they were voided and/or deleted.
  8. Review Financial Statements
    Look for any unusual balances, missing items, or mistakes. If anything looks or feels “off” look into it and figure out why the balance seems odd to you. Make any corrections or necessary adjustments.
  9. Update Budget
    Update your budget and review your budget vs. actual numbers. Determine why some budget amounts are off for the month. Feel free to adjust your budget as needed.
  10. Print and File Financial Statements and Financial Reports
  11. Close Books
    If you’re using QuickBooks, use the “Closing Date” feature. This great feature allows you to lock previous months and protect with a password. This keeps yourself and your bookkeepers from accidentally changing previous months. The “Closing Date” feature can be found under the company drop down menu. If you find any errors later on, those errors need to be corrected in the current period.
  12. Back Up
    Back up your QuickBooks, Peachtree, or other accounting software.

There you have it – 12 steps to follow to close your books at the end of each month. Adding these tasks to your monthly bookkeeping routine will help you have cleaner books, be more organized, and you’ll have an easier time preparing your books to give to your tax preparer at the end of the year.

____________________________________________________________

Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


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