Perhaps you've been keeping up with your accounting all year long...
but even if you haven't, here's a great checklist to keep you on target.
This applies whether you use a spreadsheet, a program like 17 hats, Quickbooks or just pen and paper.
1) Organize your receipts.
Hopefully you've been saving your receipts throughout the year to make sure to get all of those tax deductions. If you haven't been recording them consistently during the year, now's the time to collect them all in one place and record them.
And did you know the IRS accept digital copies of receipts??? This means you can store your receipts digitally, either in your bookkeeping software or in cloud storage, and go paperless.
If you've got a shoebox full of receipts, try out a company like Shoeboxed. They send you a 'magic' envelope. You send it back with all of your receipts stuffed inside. They scan the receipts, extract the data and store them wherever you prefer in the cloud (such as dropbox, Google Drive, Evernote, or directly in Quickbooks). It's pretty awesome.
2) Record all income and expenses.
This is where you make sure that you've recorded all the income you've received and all the purchases you've made.
If you haven't done so already, set up categories for your expenses, such as equipment, computer, office expenses, etc. Then place all of your income and expenses in their appropriate categories. It'll get you the tax deductions, plus help you plan for next year.
3) Reconcile with your bank account (if you're using a software).
This ensures that your records are accurate and you didn't miss any tax deductions. If you haven't done this at all during the year, it could take awhile. It's a good idea next year to reconcile to your bank account every month.
4) Make sure all bills are paid.
5) Get your mileage log up to date.
And don't forget to send this to your accountant. Tip: next year try out an app like Expensify to track your mileage.
6) Follow up on overdue invoices.
Look at any invoices that you're pretty sure will never be paid. It's time to clean up and get them off the books. Either send one more email or give up on them and take them off your records.
7) Pull reports for your accountant.
Typically your CPA want to see 2 reports: 1) the Profit and Loss statement (also called income statement) and 2) the Balance Sheet.
If you are using a spreadsheet, they will probably want to see 1) an expense detail sheet that has your direct costs and operational expenses sorted by category and 2) an overview sheet that lists totals for income, COGS and operational expenses.
8) Review reports against goals.
Don't skip this step!! This will set you up for a more profitable year next year.
Look more closely at the Profit & Loss Report and ask 3 questions:
- Did you make the money you wanted to make? (look at the Total Income)?
- Did you spend what you budgeted? (look at the Total COGS and Total Expenses)
- Did you keep the amount you wanted to keep? (look at Net Income)
9) Reassess your profit, salary, tax savings, expenses.
After completing step 8, now it's time to look at what you need to tweak.
Maybe you need to open a savings account for tax savings. Or look for ways to cut expenses. Or set up direct deposit to make sure to get a paycheck. Now's the time to really think about what you want your business to look like.
10) Set financial goals for next year.
(This is my favorite).
As you are looking ahead at this year, here are the financial areas to determine:
- Your total income goal. How much sales do you want to bring in?
- Your estimated expenses. Make a budget for your direct costs and operational expenses. You can use last year's as a starting point.
- Your profit goal. This will be determined by subtracting #2 from #1. This is a very important number. Just because you make $100,000 in income, doesn't mean that is your profit. Your profit might be anywhere from $30-70,000 after your expenses. Make sure you pay attention to this number! You don't want to be working hard only to be making $10/hour in the end.
- Your salary goal. From your profit, what will you pay yourself? Some of your profit needs to go towards tax savings, big purchases coming up, and reinvesting in the business. But do yourself a favor and make sure you are paying yourself.
