Do you find yourself already thinking about your year-end accounting tasks, followed promptly by a mini panic attack? Is the thought of doing that catch-up bookkeeping you’ve been putting off all year looming over you like the mountain of receipts on your desk?
You’re not alone. Small business owners spend on average more than 10 hours a month working on the books of their business, or 120 hours per year. That’s a lot of time if you consider the thousands of other things already on their to-do lists.
As per the opinion of most of small business owners say bookkeeping and taxes are the worst part of owning a business. As a result, it’s not uncommon for companies to postpone their bookkeeping tasks until year-end. But now that year-end is fast approaching, the pile of receipts on your desk is only getting bigger and the panic attacks get more frequent. The good news is that advancements in technology mean that your year-end catch-up bookkeeping can be a much less daunting process.
Catch up on your Bookkeeping–
A common first task for many of the new clients that engage BudgetEase is catching up their QuickBooks file to date. Often times, it has been years since a reconciliation has been done, principle and interest have been lumped together for just as long or the bank feeds have not been cleared of transactions. When tackling such a project, organization and the setting of expectations is important. Whether you are an accountant beginning to catch up a file or a business owner that has an outdated QuickBooks file, it pays to have an understanding of what the catch-up journey might look like.
Organizing the Project-
An important first step is to make a list of everything that needs to be done and the corresponding documents needed to complete the work. We use a Quick Audit form to make sure we have a complete list of what needs to be done. Giving the client one list of requests up front is less overwhelming than sending multiple requests throughout the project.
From the start, having all the documents for all accounts needed to be brought up to date is also useful, as it is better to reconcile all accounts for one month than one account for all months. This helps transfers between accounts and payments of credit cards and loans to be applied correctly.
Prioritize the list so that you are as efficient as possible. The bank reconciliations are important. If there are undeposited funds, you need to determine if they should be cleared before or after the bank reconciliations.
Catching Up Bank Reconciliations-
In the best-case scenario, the ending balance of the last reconciliation matches the bank statement and a bank feed has been downloading transaction data to QuickBooks even though no reconciliations were being done. If either of these assumptions are not true, they must first be fixed. The reconciliation discrepancy must be investigated, and the deleted transaction(s) replaced.
If the bank feed was not turned on, a CSV or QuickBooks Online file of the data must be obtained from the bank website. Then a reconciliation by year can be done to bring the account current. In the current year, reconciliations can be done by month, and then any unused older transactions in the bank feed can be excluded.
Catching Up Loan Accounts-
While it is nice to see principle and interest broken out each month, when dealing with closed prior periods, one journal entry per year dated the last day of that year is a more cost-effective way to bring the balance up to date. In the current year, entries can be made by quarter or month. This approach also works for breaking out payroll taxes from gross wages.
Other Considerations-
Bank reconciliations are probably at the top of the client’s mind, but there are other areas in QuickBooks to review and bring up to date. Uncleared items could be duplicates. It is best to check at the end of each period that you reconciled that the uncleared items are valid and address at that time.
Once the reconciliations are done, checking to ensure the Open Invoices and Unpaid Bills reports are accurate is a good next step. Review the Balance Sheet so there are no unexplained negative assets or liabilities.
Benefits of Catch Up Bookkeeping-
Even if the books are only behind a few weeks, up-to-date records are crucial for the financial well-being of every business. Catch up bookkeeping accelerates business growth by increasing financial visibility, which enables business owners to make decisions based on accurate information and remain tax-compliant throughout the year! Let’s take a look on the Benefits of Catch Up Bookkeeping.
1. Reliability in your Opening Balance- The financial statements report revenue, expenses, and profitability, all of which contribute to the Opening Balance. They also guide decision-making and reveal opportunities for business growth. The more up-to-date your books are, the more reliable your financial statements (and Opening Balance) will be!
Catch up bookkeeping corrects these issues and provides clarity and accuracy in your financials. Once your books are caught up, keeping them up-to-date becomes second nature.
2. Financial Accuracy Through Bank Account Reconciliation- A bank account reconciliation is performed to confirm that your accounting records match the information in your bank account. It is an opportunity to identify and correct any bookkeeping errors before the financial statements are finalized, as well as detect and prevent fraudulent activity in your bank account. Bank account reconciliation also ensures that you are accurately reporting your income to the IRS. The best practice is to reconcile your bank account once a month.
Proper bank account reconciliation can only be accomplished when the books are up-to-date. By getting your books caught up, you can ensure the reliability and accuracy of your financials each month.
3. Cash Flow Management- Catch up bookkeeping can have a significant impact on cash flow. When your books are caught up, you can pinpoint how and when cash enters and leaves your business each month. This delivers a deeper understanding of your cash needs, so you can create a plan for cash flow management.
With this insight, you can monitor your Accounts Receivable to ensure you are paid in a timely manner going forward, and find solutions for the timing of your own payments. You can also forecast future cash needs to be confident you have what you need for continued operations.
4. Insight into Net Income- Getting your books caught up is also essential when applying for loans. Creditors and investors examine Net Income when deciding to invest in a business, as it highlights the business’s ability to pay back loans efficiently. Catch up bookkeeping determines your bottom line, so you can understand and increase the profitability of your business, meet loan requirements, and secure funding for your next venture.
5. Tax Compliance- By getting and keeping your books caught up, you can identify the deductions you qualify for, maximize your tax return, and stay compliant all year long.
A Reliable Catch-up Bookkeeping Process–
New technology and third-party integrated apps made catch-up bookkeeping less of an ordeal but you still need a systematic process to get your books done on time. Otherwise, it will just be like clutching at straws to pull down the haystack.
If we do all the Catch-up Bookkeeping Process properly then we need not to worry while year-end bookkeeping process.
Conclusion
We will able to maintain efficiency in Year-end Bookkeeping Process with the help of QuickBooks. Only we need to follow the process properly.
