Dos for your End of the Year Checklist
An understaffed accounting department caused big trouble for the city of Washington, Spokane. Several errors surfaced including revenue miscalculation, an overstatement of general fund expenses and inaccurate reports of debt changes during an audit of city’s 2014 taxes.
While many of these mistakes were simple spreadsheet flubs. A matter of figures placed in the wrong spots in the city’s financial statement. The result was a multi-million dollar miscalculation. Fortunately, the state auditor’s office identified these slips in time, but the lesson was clear.
Spokane now has a fully staffed accounting department and internal procedures to prevent future disasters. A large-scale issue like this should be a warning to small businesses. Avoid the kinds of errors that carry implications for your company’s reputation. The bottom line by making a year-end accounting checklist your new best friend.
What to put on your year-end accounting to-do list
Here’s why the “winging it” approach to tax preparation doesn’t suit new companies. Not only does it threaten a potentially harmful financial fallout. It also damages company morale and paints you as disorganized.
Not having up-to-date books or a plan to file taxes, correctly and on time may hinder growth. Additionally, if your company reports payroll taxes or contractor 1099s. For not meeting requirements you may face costly penalties. That’s why establishing solid year-end procedures is very important.
And trust me, the earlier you do this is better. It is much easier to install an annual plan while the company is young. The tax requirements are relatively simple because filings get more complex as businesses grow.
In what industry you are is not needed, including these items in your end-of-the-year rundown keeps your books in order and a CEO’s mind at ease:
1. Keep internal operations on point.
It’s a great time now to double-check the internal controls you already have in place and if necessary create fail-safe procedures. Few good reasons exist for creating and sticking to internal control operations. Those operations such as fraud prevention and early embezzlement detection, maintenance of accurate financial records.
The Association of Certified Fraud Examiners found in 2014 that internal deception results in businesses losing a median sum of $145,000 annually. 22 percent of those cases posted revenue reductions of at least $1 million is worse. So, look honestly at your business.
Does your plan contain holes that make you susceptible to errors? Ensuring that your procedures are in place and working smoothly can help you maintain a solid year-end close as your company grows.
2. Keep payroll compliance top of mind.
Get employees their W-2 forms no later than January 31. It includes accrued bonuses or special gifts. It not only calms impatient workers. It also prevents major penalties. Don’t risk being charged with a federal violation that happens if the IRS proves you intentionally avoided filing to pay.
3. Collect accounts receivable.
Consider this, CB Insights discovered that up to 29 percent of startup failures owe to cash crises. Aim to close out all outstanding receivables before the year is up.
That means collecting on those unpaid invoices and reissuing or voiding checks as needed. A strong push to collect as much as possible and clean up reconciliation issues helps you maintain better control over your company’s cash flow. Expediting payments before taxes are due will help.
4. Mind the GAAP (generally accepted accounting principles).
Clean books are essential to satisfy both investors and acquiring companies. If your company’s financials aren’t already in line with accounting principles. They need to get there now.
Not sure whether you are running GAAP compliant books? Speak with a professional as early as possible. This is another area that, if monitored can save valuable money and time.
5. Send out 1099s.
Employees will claim income regardless of whether you provide them 1099s. By collecting W-9s along the way and sending out 1099s early, you can save yourself some trouble. This is much easier to take care of things early than to scramble at year-end.
Failure to send these documents out results in a $250 fine. So don’t delay. 1099s must go to recipients on or before January 31 and to the IRS on or before February 28 or March 31 if you file electronically.
6. Plan for income tax.
Now is the time to identify tax needs and engage with a tax pro in order to minimize your payments and capture potential savings. For saving your company serious money, and avoid nasty surprises invest time now.
The end of the tax year is still a little way off and yes, your plate is full. On concord, you should not put these important tasks aside for later. You don’t want to be among the estimated 40 percent of small businesses that rack up $845 per year in penalties.
7. Ensure you have the green to go.
Twenty-nine percent of respondents in a CB Insights survey reported “running out of cash” as the second biggest reason for startup failure. If you have the money set aside for that first-quarter sales hire you wanted to make or the purchase of that new piece of equipment you’ve been eyeing since the summer.
Get with your stakeholders and compile a budget for the year. Involve investors and anybody else to make sure all your fiscal ducks are in a row.
8. Stop and smell the roses.
The sense of urgency that fuels your end-of-the-year push shouldn’t preclude you from looking back at the work you’ve done. Especially, early-stage companies have much to include filing their taxes and little time to do it.
Review the year’s stack and performance the results up against intended milestones and goals. Look at your figures as a barometer upon which to judge the coming year’s objectives.
For instance, Google’s Objectives and Key Results method prioritizes the establishment of goals, making these benchmarks measurable, lofty and public, yet attainable. Making financial goals tangible and visual at year’s end can be a trusty guide for where you want to guide your business’s books during the ensuring 12 months.
All emerging companies want to grow, but too many don’t establish the procedures necessary to make growth happen. You can tick these concerns off your checklist and be prepared when taxes come due if you take action before the end of the year.
This kind of organization and planning will prevent compliance issues from coming back to haunt you. It benefits your employees and your bottom line.
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