It’s that time of year again: holiday parties, shining decorations, and firework shows with the family. As a business owner, the holidays can add even more to an already hectic schedule because of this one responsibility: year-end accounting.
You might be seeking solutions to simplify year-end accounting for yourself and your employees. At the end of the year, there are a number of significant financial changes that can leave you feeling overwhelmed. That’s okay! Even the most seasoned accountants get confused from time to time.
Luckily, help is within your reach. This holiday season, we’ve gathered your guide to balancing the books, organizing your funds, and double-checking your finances. Read on to learn how to make accounting easier than ever for yourself.
Tips to Make Year-End Accounting Easier for E-Commerce Businesses
Keep these actionable tips in mind when doing your year-end accounting for 2021.
1. Manage Invoices
Perhaps the most important thing you must do when closing the books for the year is to ensure that all of our company’s bills are current. If customers have purchased items from your company, you must give them invoices as soon as possible. If you don’t, your customers and clients will be unable to file their taxes or close their own books at the end of the year.
The clock is ticking, and you can’t keep putting off sending invoices any longer. On the other hand, you can’t keep waiting for bills from your merchants. It’s time to follow up. The majority of accounting software will allow you to effortlessly send invoice reminders to clients or customers who have yet to pay you.
2. Review Expenses
Following the first tip, you’ll need to figure out what’s going on with your costs. You’ve most likely been keeping track of your costs all year. Having all of your expenses recorded is critical to assisting your accountants in locating all of the tax breaks available to your company.
You’ll also need to keep personal and business costs separate. This is very important since failing to do so may result in the IRS sending you a dreaded IRS audit. Smaller business expenses may be deductible, but personal expenses are not. Don’t give the IRS any reason to be suspicious— you don’t want your company to get into that mess.
3. Pay Your Bills
The next step is simple: pay all of the bills that are due before the end of the year.
Remember to pay bills from vendors, contractors, and anybody else with whom you may have incurred debt.
4. Check Your Accounts
After you’ve paid your bills, you’ll need to update your accounts. This means that you must reconcile your business’s financial accounts. You must ensure that all of the income and expenses recorded in your accounting record match those on the official statement issued by your bank. Failure to perform this correctly might lead to a lot of problems because you won’t know how much money you actually have.
You should also ensure that all of your fixed assets are up to date. Make sure to include any new ones that may have slipped your mind throughout the craziness of the year’s business.
5. Decide On Employee Benefits
Finally, because Christmas is a time for giving, it’s critical that you decide on what bonuses will go to which employees. There are numerous approaches to this, and one common method is to distribute bonuses based on merit.
After you’ve made these judgments, make sure to record the bonuses. This way, you won’t lose track of where your money has gone or who has already received Christmas bonuses.
6. Verify Tax Information
Check up on tax facts that are pertinent to your business before filing your taxes in April. The IRS will occasionally adjust the amount taxed on specific aspects of your business, or add, or deduct particular deductibles, which can help you receive money back. Make sure to check out their website or consult an accountant so you know exactly what will happen when tax time comes around.
You must also ensure that your payroll tax responsibilities correspond to your quarterly payroll returns. If they don’t, you’ll need to have a skilled accountant check into it right away.
7. Check Inventory
You’ll need to conduct a final inventory and report check on your company. Do an inventory of your assets on the day you close the books—you’ll need this information for the next year so you know how much stock you have to start with.
8. Create Year-End Reports
Running financial reports is an important part of year-end accounting. These reports provide you with a detailed picture of your company’s financial situation. These reports are also required while submitting your tax return. They can be used to plan budgets and goals for the coming year, in addition to summarizing how your business did throughout the 2021.
Here are some of the reports you should run as a part of your year-end accounting:
- Profit and Loss Statement: A summary of costs, expenses, and revenues that demonstrate whether the company made a profit or lost money.
- Balance Sheet: This summarizes the assets, liabilities, and equity of the company.
- Expense Report: A report that tracks business-related expenses, such as reimbursable employee travel expenses.
- Mileage Log: A record that shows the beginning and ending mileage for a corporate vehicle.
- Payroll Summary: Provides a summary of statistics for paid personnel, such as pay, taxes, and deductions.
- Sales Tax Summary: A summary of the sales tax collected as well as the sales tax paid toward your expenses.
You can choose to run additional reports, such as a Statement of Cash Flows or Sales By Item, to get a more complete picture of your company’s financial situation. You should also speak with your accountant about any other reports that may be required for the filing of your tax return.
Final Thoughts: Year-End Accounting Tips for E-commerce Business Owners
The tips above may appear to be a lot of chore, but it’s worth it to have a fresh start for 2022. You’ll be prepared for tax season, have new business goals in mind, and a clearer picture of your company’s financial status.
To secure a streamlined year-end accounting for your business, avail Today CFO’s free consultation with our professional accountants!