Year-Ends for Business Owners DON'T have to be Stressful

Business Owners Must Read: How to Ensure your bookkeeping is complete and limit year-end Accountant Bills

For the majority of business owners, hearing that its Year-End time, tax filings are due, and dealing with accountants all result in extra anxiety and stress. Whether you do your books yourself, have in-house staff for it or hire a third party, the difference between those team members knowing basic bookkeeping vs. full cycle and year end bookkeeping makes the entire difference.

Basic bookkeeping is the monthly entries

and reconciliations. Everything is entered

and accounted for, reconciliations ultimately work out, but more often than not balance sheets don’t end up matching “actuals” in regards to balances and statements in all accounts. This is generally due to duplicate entries, misallocations, payments for accounts payable not being properly applied, same as payments received for accounts receivable, tax modules not being used as they should be, etc. Many reasons.

Full-cycle and year-end bookkeeping is the thorough review of the balance sheet and income statement to make sure that all ending balances match as they should. Example: Your bank has been fully reconciled to the correct amount and date of August 31 with an ending balance of $24,210.96. BUT your balance sheet as of August 31st shows a bank balance of -2,412.99. This will be a result of uncleared transactions from prior dates that need to be addressed.

That is the difference between basic and thorough bookkeeping. Looking back to when I started bookkeeping, I can admit that I thought I was thorough but humbly now say I was a very basic bookkeeper. Education was not enough to prepare and teach me what it truly means to be a great bookkeeper. That came with a ton of experience working with over 40 different businesses to date, and with a few mistakes in which I took very seriously and made right, along with reaching out to one willing CPA who has consistently provided mentorship and sees the value in training willing-to-learn bookkeepers. Accountants will still accept the books done in a basic manner, but generally you will be asked many additional questions and clarifications, along with a substantially higher accountant bill.

The majority of the new intakes this year have come to us with clean-ups required, and many of them have not realized that there were transactions lingering in accounts from prior years, some up to 15 years previous. Ultimately an accountant can do their work and show financials as accurate each year, but if you want your in-house bookkeeping software to be accurate, have it cleaned up yearly.

As a business owner, there are some pretty straight forward checks you can do to just at least make sure bookkeeping is clean for year-end, no matter how knowledgeable you are with numbers and bookkeeping. Just have another set of eyes do a few comparisons before submitting to your accountant and you will have an idea of what sort of changes and extra work will be needed for year-end. These are just general points, and definitely do not go into some of the detail needed to clean up accounts but a good starting point.

Balance Sheet Checks

1. Run the balance sheet as of year end

2. Check that all balances for banks, loans, credit cards match the paper statement ending balances - if these do not match there are adjustments and clean up needed, unless there are outstanding cheques that are not cashed until the month after, that is ok. Run through the account to see where errors lie. Make sure accounts are reconciled!

3. Make sure that Inventory asset accounts are adjusted against COGS inventory expense accounts. It is good practice to do this monthly. If you have a separate point of sale system from your bookkeeping software, you should be able to run reports to show the value of inventory and do the adjusting journal entries.

4. Equipment, machinery and building accounts. Create separate asset accounts for each large asset you have. If you have a loan for this item, you should have separate loan accounts as well. Lumping them all together makes it hard to reflect accurate balances and depreciation.

5. PST, GST and Payroll Tax Accounts. The Payable accounts should match the balance for the current period owing as of year end date. Suspense accounts match what the statement of accounts show online for periods filed. Ultimately payroll owings should just equal the balance of the last month of year end if monthly remittances are being made as required. Again, make sure these accounts are reconciled!

Profit Loss Statement Checks

1. Run the profit loss statement for the full fiscal year

2. Check your income accounts and ensure they make sense and you don’t have sales in accounts that are not needed, or do not belong.

3. COGS (Cost of Goods Sold) - these accounts are for inventory costs and anything associated with the cost of the product you buy to resell, or material purchased to service a job. COGS freight is any shipping that you pay on inventory or material that is sold in your sales and services. General supplies for jobs or in-store are expenses - not COGS.

4. Expense accounts - again go through and make sure these make sense and are required. If you have a promotional account with a balance of $43.62 from only one transaction and an advertising account with a balance of $245.67 you use more regularly, just combine them. One transaction in an account usually isn’t required, unless it is a major purchase. Clean up your accounts. Make sure receipts are entered with proper taxes.

5. Home expenses - often you are able to use part of your home if you run your business out of it, have an office set up, etc. There are many great resources online as well under CRA, and business help agencies such as Square One, BDC and WESK. Or ask your accountant or bookkeeper!

Having up-to date on clean bookkeeping is such a breath of fresh air and takes a lot of stress off of business owners. Reconcile accounts and review financials monthly. Not only does staying caught up and accurate in your books keep you on the good side of the governments, you also can get clear pictures of what your bottom line and profit actual is each month, quarter and year.

You do not have to suffer through these business tasks, there are resources and help around you, reach out!

As always, your support and interest in muchly appreciated. Thank you all! Hope these reads help you and your business processes.

-Angel Dams, Owner B&BYXE