Would you believe it? That there is even such a thing as, the next big thing in accounting? But there is. The next big thing is the potential for there to be a mandate that all small business owners use technology for their businesses. Not just a CRM or ecommerce platform, but also technology that consolidates economic events into one place, like an accounting system. Possibly to file a corporate tax returns, or as a criteria to secure a loan. The thought is endless! The reality is, that the need for information is growing greater, in order to make quick decisions that are rooted in the numbers for joint ventures, collaborations, tradelines, credit, etc. What hinders most small business owners is the inability to close their financial books timely. For one reason only. These business owners do not have the necessary technology. Does this sound like you? putting receipts in a folder, drawer, or scanned to a cloud drive creating invoices for customers in an excel file hand writing checks using personal credit cards for business expenses no business bank account, much less a bank reconciliation If small business owners do not begin to align their business with technology, the year will have gotten away from them. Bookkeepers and small business owners can work together to achieve great feats by creating an organized environment for recording, documenting and reporting results. Are you ready to talk to an accountant about the next big thing in your business? Adding a bookkeeping partner on your team, even if on a quarterly basis, can help to guide your company through closing the year. All economic events need to be recorded: You are required to have a proper cut off for all transactions earned and incurred in the current year. A good way of ensuring that all transactions are recorded is by reconciling 1) petty cash accounts, 2) bank accounts, and lastly any and all company credit cards. All economic events need to be reviewed and analyzed for accuracy: The size of the small business will determine the extensiveness of your monthly or annual review. Though it is our custom to review transactions monthly, that is not a standard practice for every organization. In which case, preparing a Trial Balance and reviewing the activity on the Trial Balance for the year is a good place to begin the review to close the year. This report provides the beginning and ending balance of each account and the activity that adjusts the account(s) throughout the year. According to the accounts that are reported, you can identify accounts that appear suspicious or questionable as to the amount reported, or you can run a transaction listing report and review each account separately. Review the balance sheet thoroughly: The balance sheet is a document that lives with the company forever. It reports the worth and value of the company throughout its existence. It is extremely important to review this report especially, because if a company fails to reconcile asset and liability accounts throughout the year, it’s possible that erroneous postings and entries are hung up on the balance sheet. This results in a misrepresentation of the company’s overall worth, it also will cause a company to report significant profit or loss, ultimately affecting the business’ tax liability. Therefore be mindful that: All values identified on the balance sheet are verified by source documents, this includes loans to the company from the owner. All accrued liabilities are true Accounts receivable for the total company are representative of balances owed by customers, and Adjusting entries made by journal are supported by documentation that justifies being posted to the ledger Closing Summary: The 3 tasks identified are not exhaustive; but critical to reporting accurate financial information for tax reporting purposes. These tasks, if performed frequently throughout the year, will ensure that statements provided to owners during the course of the year are far more accurate, especially if the statements are being used strategically.
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