As the financial year draws to a close, it might seem too early to review your accounting system as a business owner. Should you start checking your books of accounts at the end of the financial year? The answer is yes.
This gives you an opportunity to analyse your accounting system, including the taxes, to enhance business efficiency. You can identify the areas of your business that need improvement.
In the next section, we share 7 accounting tips that take your business efficiency to the next level.
Follow these accounting tips to improve business performance:
Check the accounting software as part of your year-end audit. Federal regulations keep changing every year, and your accounting software should have the latest updates.
According to the latest regulations, for transactions in real estate, Form 1099-S is essential. You can only access this if you have the latest version of the accounting software. If you have an older version, ensure that you upgrade it immediately.
You can find errors in financial transactions through the reconciliation of credit cards and bank accounts. Expenses through checks and credit cards should equal transaction records in credit card and bank statements.
While books of accounts and bank records are tallied all year round through bank reconciliation statements, doing a detailed checkup at the end of the year can help identify any errors that are lowering your profits.
Go through your filed returns to analyse if you have optimised your tax payouts or not. If you have filed your returns per the latest tax policies, your tax outgo should be the least. If not, you have paid taxes at higher rates, resulting in lower margins.
Your accounts department should stay updated regarding the latest changes in tax policies so that you can claim all the benefits available. Proper tax planning can only be implemented if your accountant is aware of the latest regulatory changes.
Discuss the best tax strategies with your accounts team for the coming year so that each entry is made as per current policy.
Errors in your two primary financial statements – the Profit and Loss account and Balance Sheet – could get your business into trouble. You will get to know the financial status of your business through the Balance Sheet.
The four broad items in the Balance Sheet include assets, liabilities, and equity. The assets and liabilities sides need to be equal. Check the ledgers and trial balance so that all entries are posted correctly under the proper heads.
For businesses based in the US, you need to fill out form W-2 to report employee wage information. Apart from information on the total wages paid for the year, form W-2 includes all taxes paid on those wages. Taxes comprise both state and federal taxes.
Form W-2 stands for Wage and Tax Statement, and this form is issued by the IRS. For Canadian business owners, wages need to be reported in Form T4s. Employees hired this year should have all required information recorded in these forms. Failure to follow this norm attracts huge penalties.
You can file employee information without any delays. Instead of updating forms, use the latest forms to avoid hassles.
Suppliers and vendors form a critical part of your business.
To make payments to vendors and suppliers, you need to use form 1099 – NEC, which covers non-employee compensation if your place of business is the US. For business owners in Canada, form T4As need to be filed.
Filing the right forms lets you submit your employee information on time.
Getting all this information in advance lets you assess the performance of your business. Did your business grow at the expected rate? Are your profit margins improving or declining?
This exercise of analysing your business performance lets you discover your strengths and weaknesses. You can also check the deviations between your budget and actual performance. Identify expenses that are not adding to your revenues and eliminate them.
With year-end accounting, you are also able to design a more accurate budget for the next financial year. Classify your customers into good, doubtful, and bad debts and manage your cash flows better. Negotiate with your suppliers for discounts and a more flexible payment schedule.
By matching your peak-season inflows with your outflows, you will not need to take short-term loans from banks and other financial institutions. By doing this, you are able to save interest on term loans and increase your net profit.
Higher efficiency means higher profits for your business, and with these 7 simple accounting tips, you can easily achieve success. The year-end is an ideal time to prepare your business for the next year.
Focus on your core area and outsource your accounting requirements to a professional firm. Choosing this option lets you spend more time scaling your business to the next level, while these firms ensure that your books of accounts are kept in accordance with the latest accounting regulations. This is a win-win situation for both you and the firm since not only do you enjoy higher revenues, but you also pay the minimum taxes. It’s nearing the end of the year, so are you ready to review your accounts for outstanding performance in the coming one?
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