How Better Bookkeeping Can Avoid Surprises at Tax Time
Have you ever received your tax preparation bill from your accountant with an extremely large added bonus of “accounting assistance” added to the bill?
If your books are not in good order when you provide your QuickBooks file to your accountant, they will spend time (at THEIR billable rate) putting your financials in order.
Here are some tips for getting your books in better shape prior to year-end:
- Do not mix your personal and business expenses together in the same bank or credit card account. The #1 time consuming task for every accountant is pulling apart bank and credit card registers to segregate personal from business expenses. If possible, set up separate bank and credit card business accounts which are used strictly for business purposes only.
- Reconcile your bank and credit cards on a monthly basis. If your bank and credit card accounts are not reconciled, you may missing income or expenses for your business.
- Reconcile your loans as of year-end. If you are not familiar with how to post each loan payment split between interest and principal, at least have a year-end statement available for your accountant so that they can make one quick journal entry to bring the balance to where it should be.
- Review your Accounts Receivables report to see whether there are receivables that you do not expect to receive payment on which can be written off to bad debt. Again, if you are not familiar with how to post this entry to Bad Debt, provide your accountant with a list of those receivables that can be written off as of year-end.
- Review your Accounts Payable report to determine if there are old payables on the list which have actually been paid but never cleared your payables account. If you are not familiar with how to post these transactions to clear the payable, then provide your account with a list of old payables which they can adjust for the tax return.
- Examine your basic financials statements on a regular basis. By being familiar with your Balance Sheet and Profit & Loss (Income Statement) reports and what the general ledger accounts that you use for your business transactions, you can easily discover if transactions have been posted to the wrong general ledger account by how the figures look on these reports.
Should you need any assistance with any of these tips, feel free to reach out to the RAD staff at Davis & Hodgdon. We help our clients get their books in good order BEFORE they bring their QuickBooks file to their tax preparer.
With offices in Williston and Rutland Vermont, Davis & Hodgdon Associates CPAs has been assisting Vermont’s residents and entrepreneurs for more than 30 years. Call our office at 802.878.1963 (Williston) or 802.775.7132 (Rutland) today.
Written by Martha Leonard, RAD Bookkeeper and QuickBooks Online Certified ProAdvisor