By Amanda Karen | CrunchSum
The end of the year can require a lot of additional work for your business, especially in the area of your business bookkeeping. We have compiled a list of 7 quick tips for those that use QuickBooks Online, to help you ensure that your bookkeeping data is as accurate, complete, and organized as possible for both the upcoming tax season and the upcoming year of business. Please note, this is not a comprehensive list, but just 7 of the best tips we could think of that should apply to most businesses. We also challenge you to take an honest look at your business bookkeeping and evaluate where improvements can be made.
1. Review your Accounts Receivable balance
Are there any customer open invoice balances that are very old (i.e. > 120 days)? Ask yourself – do you reasonably expect to ever receive payment for these open invoices? If not, work with your bookkeeper to write the balances off as uncollectible. There is no reason to carry an AR balance on your books that does not accurately reflect what you expect to receive from your customers.
2. Review your miscellaneous expense and income accounts
Do you have balances in these accounts? Have transactions been recorded in error? Technically, you should work with your bookkeeper throughout the year to only record transactions to miscellaneous accounts as a last resort. As transactions occur, you should be able to record with great accuracy what expense and income transactions are for and create new accounts to record transactions as necessary. However, when these accounts must be used, it is good practice to include a memo detailing what the transaction was for and why it is being recorded to the miscellaneous account.
3. Review your Undeposited Funds account
This account acts as a holding account between the time you receive payment (usually via the “Receive Payments” screen) from a customer in QuickBooks Online and the time that you actually record the deposit into your bank account. You should never have a balance in this account. A balance will result if you neglect to record the deposit side of the transaction. If you do have a balance, research why and aim to clear it out at least by the end of the year, if not on a monthly basis.
4. Complete bank account reconciliations for all of your prior year data
Completing bank account reconciliations for all of your bank accounts including checking, savings, and credit cards will help to ensure that your data is accurate, current, and complete. Regularly reconciling your accounts will help you catch bank errors (i.e. incorrectly charged fees, etc.), ensure that all of your bank transactions have been recorded in QuickBooks Online, and most importantly, will help to ensure that your data is accurate and complete for your CPA and tax preparing purposes. It is good practice to reconcile your bank statements on a monthly basis.
5. Record accidental personal expenses
You should always strive to keep personal and business expenses separate. However, it happens. Sometimes you mistakenly make personal purchases with your business debit or credit card and vice versa. Make sure that these transactions are tracked and recorded properly in QuickBooks Online. Do you need to reimburse your business for personal expenses accidentally made on your business account? Do you need to record an expense in QuickBooks Online for a business related purchase that was charged on your personal account? When recording these kinds of transactions in QuickBooks Online, get in the habit of including a detailed memo in the memo field noting the nature of the transaction and any future activity that is scheduled to take place involving the transaction (i.e. reimbursement to company, etc.).
6. Prepare your 1099s*
Start this task once your bookkeeping has been completed through 12/31 of the prior tax year (i.e. 12/31/2013) and you are confident that your data is accurate and complete. Identify any of your vendors that meet the qualifications for a 1099 vendor as per the IRS. Follow the steps here for QuickBooks Online to prepare and print your 1099s or have your bookkeeper complete this task for you. Don’t forget to provide your 1099 vendors with their prepared 1099 form by January 31**.
*This feature is available only for QuickBooks Online Plus.
**Date subject to vary between years – confirm due date for current tax year with IRS.
7. Review your chart of accounts, vendor, and customer lists
Chart of Accounts
Over time your business bookkeeping needs might change. Do you have accounts that you no longer use? Do you have duplicate accounts? Can your chart of accounts be refined and condensed in any way? These are all good questions to ask when reviewing your chart of accounts.
It’s a good idea to review your vendor list on at least an annual basis. It is very common to have the same vendors listed multiple times within your vendor list under slightly varied names. This usually occurs as a result of how they come through via your downloaded bank transactions. Review your vendor list and merge or delete vendors as needed.
Are there customers that your business no longer provides services to? If so, you can delete these customers. And, don’t worry, if you choose to delete a customer you can still access their contact information at any point in the future by viewing the Customer Contact List in QuickBooks Online and customizing it to include all customers (both deleted and not deleted).
Take an honest assessment of your current bookkeeping process
How much time do you spend on your business bookkeeping each week, month, quarter, year? Consider hiring a bookkeeper. Bookkeeping is a task that many entrepreneurs want to handle on their own for as long as possible. Weigh the costs and benefits of doing it yourself honestly. Ask yourself questions like how much time does my bookkeeping take? Does completing my bookkeeping or even the thought of it add stress to running my business? Are you confident in the accuracy and completeness of the bookkeeping data that you use to prepare your own business taxes and/or provide to your CPA? Does it make sense to incur the cost of hiring a bookkeeper given the long-term benefits that this decision would likely provide? Ask yourself honestly, should you be doing your own bookkeeping?
Is there anything we missed? Leave us a comment below!
CrunchSum provides web-based bookkeeping and QuickBooks Online support services to web and technology companies.