With the end of the year just a few weeks away, many small business owners are starting to think about closing the books. Here are a few tips to make the process as simple and painless as possible.
Don’t procrastinate until the last week of December. Start working on the materials for the previous 11 months now so you will only need to worry about records for the last month to reduce your workload.
Many people want to take time off near the end of the year. Even if you know when your own employees are working, the holidays can make it difficult to reach vendors and clients. If you’re working with an outside accountant, they could be busy with other businesses or have their own holiday plans, so schedule appointments now.
Gather Financial Statements
Get a copy of your business’s financial statements from your financial institution. Most banks allow you to download statements for the past few months, but you may have to request that they mail older statements.
Create an income statement and cash flow statement if you do not have them already. Your accountant will want to see the business’s assets and liabilities.
Organize All Purchase Records and Receipts
If you keep paper receipts instead of digital copies, consider investing in a document scanner that allows you to keep digital records. They are easier to keep track of and take up no physical space. You also won’t have to worry about the thermal ink fading over time, and if you store them on the cloud, you won’t need to worry about natural disasters destroying your records.
If you have paper receipts, make sure you keep them all in one place. You can organize them by date, type of purchase, or cost, but make sure they are in some kind of order before you hand them over to your accountant or bookkeeper.
Determine if You Can Claim Vehicle and Home Office Deductions
If you use your personal vehicle for business, you can write off some of the operating expenses. There are two ways to calculate these costs, but both require you to keep detailed mileage logs. You should keep a log of the dates, number of miles driven, and the reason for the trip. Turn these logs over to your accountant and she will determine the best calculation method.
If you work from home or meet clients there, you can claim part of your home expenses such as rent, certain utilities, maintenance, and insurance. There are multiple ways of calculating your deduction based on the amount of space your home office takes up. You can claim up to $1,500 using the simplified method based on $5 per square foot, or a more detailed method that requires additional paperwork.
Is Your Accounting Software Ready?
Cougar Mountain Software’s Denali accounting software for small businesses makes it easy to prepare your business finances for the end of the year, whether you do them yourself, or turn them over to a professional accountant.