How to ease the pain of year end

Read this if you are responsible for a set of books.

The key to smooth year ends is to adopt the philosophy that every reporting month, or quarter, is just preparation for year end. Then, when you hit year end, you are just wrapping it up with a bow for tax and external reporting entities. Here are some simple changes to consider that may ease the pain of month-, quarter-, and year-end reporting. 

• Variances 
  Variances exist in the audit world—when you are the bookkeeper you make the adjustments. Waiving on a variance potentially kicks a problem down the road and the road ends at year end. Best to take care of it to avoid adding extra work at the end of the year. 
  • Abandoned Property. One thing we do not want is abandoned property, so as bookkeepers we need to stay on top of and clean up long outstanding checks, old credit balances in the accounts receivable, and on the other side of it old credits in our accounts payable. Be proactive about getting the money where it belongs.
•  Accounts Payable
  To avoid messy cleanup in your AP file at year-end, use best practices for AP, such as:
  • Making sure every vendor has a W9 on file electronically that is easily accessible. 
  • Procure new vendor W9s as soon as possible, so you don’t spend valuable time at year end trying to obtain them with the reporting dead line looming. It is easier to obtain a W9 if you don’t issue their check until you have their W9.
  • Most good general ledger systems also have options to track and accumulate dollar amounts for 1099s. Be sure to utilize this feature all year long.
• Reconciliations & prior year comparisons 
  • You should have a copy of the company’s capitalization policy on file. The dollar threshold for companies varies, to meet their operational needs. This policy is then used for item b, below.
  • Repair and maintenance accounts should be reviewed for items that qualify for capitalization—and if they qualify by $$ but are still deemed maintenance—you should file a copy there, with rationale for why.
  • Any accounts that are important to tax should have a work paper. For example, charitable contributions. You will often find items in this account which are not 501(c)(3). These should likely be re-classed to sponsorships or advertising. All the non-deductible items should also have a work paper.
  • At least quarterly, you should run a comparison of the prior year to look for variances with any significant ones being explained. As the bookkeeper, you should understand what is going on and why, so you can report to management if needed.

If you have any questions about reporting, please contact our Outsourced Accounting team. We’re here to help.