As sure as the sun will rise, every December 31st, we’ll be ringing in the New Year. Will you have wrapped up your finances by then?
There’s something very satisfying about turning our calendars to January. It always feels like a fresh start. We resolve to develop new, better ways of using our work and leisure time. We reflect on what we accomplished in the last 12 months, and we look forward to achieving even more in the next 12. But sometimes we have a nagging feeling that we forgot something. And it often has to do with our finances, both personal and professional. You can take steps now to make New Year’s Day less worrisome. Doing some extra work in QuickBooks during December will ensure that you’ll start the new year ready to move ahead, rather than scrambling to see what you missed on January 2.
Where to start? Depending on how conscientiously you entered transactions and ran reports, you might need to set some extra time aside in the midst of your other year-end and holiday-related commitments.
For example, did you instruct QuickBooks to “close your books” at the end of the year? QuickBooks will automatically make year-end adjustments if you entered December 31 as a closing date in Preferences. However, it’s not required, and there are both advantages and disadvantages to doing so. We can help you decide if this is the best decision for your company.
Figure 1: If you set a closing date of December 31 in QuickBooks’ Preferences, you need to prepare your company file for this deadline in advance. We can help you get ready.
Prior to this, though, there’s another important task you should complete before the end of the year. It’s common sense, but not everyone thinks of it during the December rush: Make sure you’ve entered all transactions and payments that should be included in your QuickBooks file for that year.
If anyone else on your staff works in QuickBooks, make sure they know that you’re trying to wrap up the year. If they’re holding anything back because of questions and comments, now’s the time to confer with you.
Taxes and Accounts
You may have already been working with us on tax planning for the current tax year. If you haven’t, and you haven’t been doing so on your own, you need to look at your incoming and outgoing funds for the year before it’s over. Do you need to hold until the new year some income and/or expenses that haven’t been recorded until then? This kind of question really needs to be resolved now.
Figure 2: Time is short, but we may be able to help you make some decisions about carrying some of the current year’s income and/or expenses over to the new year if it will help reduce your tax obligation.
Talk to us about your tax situation if you think this may be necessary. We can’t prepare your taxes yet, of course, but we can create some reports and advise you on any situations where you might want to put off – or accelerate – some actions. Is your income running high and your offsetting expenses low? If so, this may be a good time to make a fairly major purchase you’ve been considering.
Odds and Ends
How do you back up your QuickBooks company file? On a local drive or in the cloud? How often do you do this? Archiving your data is critical. Think about what would happen if you lost your customer records or a month’s worth of transactions or multiple payments. This is an area where we can provide guidance. Is there a better, safer way to ensure data security? Are there special backup activities you should do at year’s end?
Some companies wait until January to do a physical inventory count. Rather than being surprised in January, you may want to consider doing this now if it’s feasible.
And when you think you’ve entered everything but payments or transactions that may come in at the last minute (unless you’re going to defer these until the new year), all accounts should be reconciled. QuickBooks makes it easy to do this regularly.
Figure 3: Before the end of December, you should do a final reconciliation of all accounts for the current year.
It will be painful to open QuickBooks on January 2 if you don’t feel like you paid extra attention to your finances in December. We can help you ring in the New Year on a more confident note.