170: End Of The Year Bookkeeping Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Empl
170: End Of The Year Bookkeeping Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
If you have a business or do bookkeeping for business owners, you know now is the time you need to wrap up your year-end financial statements. If you’ve heard the phrase closing the books, this is exactly what it means. You simply make sure you have all your money coming in and money going out of your business recorded and reconciled so that your financial statements reflect accurate data. You will use this data to prepare your tax return, so it is extremely important that you do this correctly. In today’s podcast episode, you’ll learn the top tasks you need to do to close out your books whether you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances, or if you are doing your bookkeeping manually with an Excel spreadsheet or even a Google Document. Many of the processes are the same regardless of which system you use to do your bookkeeping. Having your financial statements and your bookkeeping ready so that you can have your tax return prepared on time with little to no stress is the ultimate goal here. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper or accountant, a virtual assistant or VA, or other professional; I want you to make sure you are prepared to file your taxes on time feeling confident that you have accurate data. If you’ve ever wondered what you need to do to finalize your end-of-the-year bookkeeping and financial statements, listen in as I walk you through the steps you need to take today...
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Show Notes:
If you have a business or do bookkeeping for business owners, you know now is the time you need to wrap up your year-end financial statements. If you’ve heard the phrase closing the books, this is exactly what it means. You simply make sure you have all your money coming in and money going out of your business recorded and reconciled so that your financial statements reflect accurate data. You will use this data to prepare your tax return, so it is extremely important that you do this correctly. In today’s podcast episode, you’ll learn the top tasks you need to do to close out your books whether you are using a computerized software system like QuickBooks, Xero, Wave, or FreshBooks for your business finances, or if you are doing your bookkeeping manually with an Excel spreadsheet or even a Google Document. Many of the processes are the same regardless of which system you use to do your bookkeeping. Having your financial statements and your bookkeeping ready so that you can have your tax return prepared on time with little to no stress is the ultimate goal here. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper or accountant, a virtual assistant or VA, or other professional; I want you to make sure you are prepared to file your taxes on time feeling confident that you have accurate data. If you’ve ever wondered what you need to do to finalize your end-of-the-year bookkeeping and financial statements, listen in as I walk you through the steps you need to take today...
Welcome Back…Closing the books or finalizing your financial statements is something you need to do so that you know you have accurate information to report on your tax return. This is the process to make sure that all your financial transactions are recorded, up to date and accurate. If all this talk about financial statements and taxes is starting to raise your anxiety, I want you to take a deep breath in and release it slowly. This does not need to be hard or stressful, especially when you know exactly what you need to do, and you have someone you know you can trust to help you out if you get stuck. I understand you may have lots of questions, and that is why I am here for you. Sometimes, all you need is to be pointed in the right direction, and that’s exactly why I wanted to talk about this topic today.
You might be asking why I think now is the best time to close out your books or finalize your financial statements, and simply put, it is normally when you have received your bank and credit card statements, you can have all your transactions recorded for the year and then can reconcile to ensure you have everything accounted for. It is when you can make any final adjustments so that all your balances are correct. You will also need to have certain information recorded so that you can keep up with compliance matters, such as issuing any 1099s by January 31st. If you don’t have all your information recorded, how will you know how much you have paid your vendors? Making sure you have everything caught up by mid-January will help you meet these and other compliance deadlines as well. I’ve covered what 1099s are and what you need to do to file them in a previous podcast episode. If you’d like, you can go back and listen to that episode so that you know what your business is required to file.
We’re going to start off with touching on what your financial statements include. There are two main reports you will need to file your tax return. The first is your Balance Sheet, and the second is your Profit & Loss Report or your Income Statement. Either of these two titles refer to the same report. I’ll refer to this report throughout this podcast as your Income Statement. These two reports will encompass everything you record in your bookkeeping within your business.
The first step I want you to take in closing your books is to make sure that you have recorded all of your invoices for the year. Once these invoices have been recorded, make sure that you look over your Accounts Receivable balances. These are the amounts that your customers owe you. If you find that any of your balances are off, you need to make adjustments, so they are reflecting the correct balance as of the end of the year. If you have balances that you know you will never be able to collect on, you can write these off as bad debt. Your Accounts Receivable balance shows up on your Balance Sheet in your Asset section since it reflects money you will be receiving in the future.
Next, you should do this same process for your bills. Once you have recorded all your bills or payments to vendors, you can look over your Accounts Payable balances to ensure they are all accurate as well. If you need to make any adjustments, now is the time to do this. Your Accounts Payable balance shows up on your Balance Sheet in your Liability section since it includes the amounts that you need to pay.
If you have a credit card for your business, I want you to make sure you have recorded all the transactions through the end of the year. Your credit card balance will show up on your Balance Sheet in the Liability section as well since this balance is also a balance you will need to pay in the future.
Once you have received your bank and credit card statements, it is time to reconcile them. This is something I recommend you do on a monthly basis so that when you get to the end of the year, you only have your last month to reconcile. If you are behind, make sure you reconcile each month to ensure you have captured every transaction. Many clients will miss bank service charges or interest when they are not reconciling their bank statements. When you are reconciling your statements, watch for any outstanding withdrawals or deposits. If you see outstanding transactions, make sure that they are still going to clear. This is where many clients will find missing or duplicate entries if they are using a computerized software system for their bookkeeping, such as QuickBooks. If you find you need to make adjustments on any outstanding transactions, make sure you do this before you close out your books.
Now it’s time to look over your Balance Sheet. I recommend taking a look at your Balance Sheet to make sure that every account that is listed has the correct balance. You will start with your asset section. If you have reconciled your bank accounts and cleared up any outstanding transactions, these accounts should be correct. You will also see your fixed assets, accounts receivable, and inventory if your business has these accounts. Next, look over your liability section. Here, you will see balances such as your accounts payable, credit card payable, payroll liabilities, sales tax payable, and loan balances. You can confirm any loan amounts by looking at your loan statements. Towards the end of your Balance Sheet, you will see your equity section. Make sure these amounts are correct as well.
The Income Statement is the next report I want you to take a look at. This report will list all of your income and expenses for the year. You can go through each of your accounts to make sure that you have recorded each entry in the correct account. If anything needs to be changed, this is the time to make the change. Make sure that you do not have any personal expenses showing up on your Income Statement. These should be recorded as a draw and would show up in your equity section of your Balance Sheet.
If you have any business expenses that you have paid for personally, you will want to make sure that you have these recorded in your financial statements as well. These may require you to use a Journal Entry to enter the transactions. One of the most popular adjusting entries at the end of the year is the mileage deduction entry. If you are using the standard mileage deduction method of recording your automobile expense, you need to make an entry to get this amount in your financial statements. You are required to have a log of all your business trips made throughout the year. When you add up the total number of business miles you have driven throughout the year, you will calculate your standard mileage deduction by taking your total business miles and multiplying this number by the standard mileage rate for the year. This can be a considerable amount if you do a lot of driving for your business, so make sure you are keeping your log so that you can take advantage of this deduction. I tell clients that if they are not tracking this, they might as well throw a dollar bill out the window every time they drive two miles. If you do a lot of driving, that could really add up.
When your financial statements are correct, I recommend closing the books by setting a lock date if you are using QuickBooks or QuickBooks Online. This will prevent you from accidentally recording any entries in your closed period. This would also be a good time to do a backup of your QuickBooks file if you are using the desktop version.
Now that your financial statements are complete, you can contact your tax preparer to have your taxes done. I recommend getting your information to your tax preparer early. They get extremely busy, and I am sure they would appreciate having ample time to prepare your tax return.
Like I mentioned earlier, if you have any questions about closing the books for your business, or if you are looking for help with your bookkeeping, reach out to me and let me know. One of my objectives for this podcast is to help business owners like you make sure you have accurate financial statements you can rely on, and I am here to help you. You know you can always reach out to me by going to www.FinancialAdventure.com/Contact-Us. I personally respond to all my emails, and I understand that this time of the year brings up lots of questions. Even though understanding your financial statements is important, it is only one part of the success of your business. Imagine having a system in place where you spend less time buried in paperwork and more time doing what you love. That’s where I help my clients. They are able to have proper processes in place, understand why they are following through with these processes, and they have more peace of mind when it comes to their business. Striking a balance between the demands of running a business and maintaining a fulfilling personal life is an art; it’s about creating an environment where you can thrive and support your lifestyle. By being proactive and setting up efficient processes, you can ensure a smoother, more enjoyable year-end, and you’ll be prepared to file any necessary filings with the IRS. By working with me, you’ll change more than just your bookkeeping processes. Like many of the clients I’ve worked with, you’ll go from not knowing how to get through all the stressful situations or being unprepared to being totally in control of exactly what you are choosing to get done at the time you want to have it accomplished by, all while knowing you are doing enough and you’re able to enjoy your business and your personal life. I help clients just like you with strategy, mentorship, and coaching. When you work with me, you’ll show up much more differently than you do today, and, after all, this is what you ultimately want in your life, right? You can be stress-free in both your professional and personal life. Come join me. When I work with clients throughout the year, they are able to reduce their stress and overwhelm, understand how to master their small business finances, develop solutions to grow their bottom line, and create a work-life balance they truly enjoy. I encourage you to take the next step by signing up for a free consultation where I’m going to teach you the first step in my process so that you can eliminate stress, overwhelm, or overworking in your professional or personal life while you continue to get done what matters so that you can live your life with joy, purpose and a more fulfilled life. Feel free to reach out to me with any questions you have; I’d love to help you on this journey. You can schedule your free consultation or sign up for a coaching session today at www.FinancialAdventure.com. As a Certified Public Accountant and Certified Life Coach, I can help you set goals and develop a plan that will allow you to lead a happier and more sustainable life in your business, career, or your personal life. I’m here to guide you through the financial aspects of your business as well as help you focus on the strategies you need to follow to reach the success you want to achieve in your professional or personal life and stay committed so that you can continue to keep pushing forward and relieve the stress, anxiety, or overwhelm you are currently feeling. Having an accountant and certified life coach like me can provide you with valuable insights and ideas to help you simplify your life, which enables you to go back to enjoying your professional and personal life. I work with business owners, accountants, and other financial professionals to create the actionable steps they need to take to ultimately achieve their goals while getting relief from the stress and overwhelm they feel from the pressure of owning a business, deadlines, and the workload they face every day. If you are struggling with this as well and would like some help developing a solution, help strengthen and maintain your emotional health, increase your well-being, create a more positive, happy, and joyful life, set and achieve your goals, and manage your relationships, I’d love for you to join me in my Balance Life Coaching program so that you can live a more purposeful life. Each week, we meet privately one-on-one, and you get to bring whatever is on your mind on any given week. I also have a daily coaching program where you can talk to me whenever it works best for you, 24/7, any day of the week. In either program, you get to work on your highest priority, whatever you want more of in your life, or if there is something that is weighing on you heavily that you need coaching on, and we’ll work through it together. Having a certified life coach like me helping you through all of this allows you to feel so seen and cared for, and the results are amazing. Everyone benefits when they work with a certified life coach. After every session, you feel energized, and you know exactly what to do for the day or week to come, and relief knowing we will meet again to go over anything that comes up after your session. You’ll gain self-awareness while you take each step toward your goals. The investment in either of these programs is an easy yes for you. I’ve set these programs up in the most supportive way. If you are ready to join the Balance Life Coaching program, you can go to www.FinancialAdventure.com and click on the work with me button. You’ll see the link to join as well as additional information about the programs. Sign up now. There are limited spots available for these programs due to the one-on-one aspect, and they do sell out. If the payment link is gone, you can get on my waitlist to join the programs when additional spots are available. I help people get results and live a more joyful life. I coach everybody on everything. I know there is something you want in your life, and I can help you get it. I know this is something you’ve been waiting for. I’ve been asked by many of my listeners to create these exact programs. The faster you get access to the program, the quicker you’ll see the possibilities available to you. I also have a risk-free guarantee. I believe so strongly that everyone benefits from coaching that when you sign up for the Balance Life Coaching program today, if for any reason you are not satisfied with your first session, you can send us an email, and we’ll refund you immediately. Are you ready to enjoy your life now? Why would you want to wait? Make this investment for yourself. Take the journey with me…make it happen for yourself. Ask yourself why you need this program in your life right now. Are you ready to make bigger, bolder, stronger life goals? I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business or career and start creating actionable steps so that you can reach your vision and goals for the future, not only in your business or career but also in your personal life. I’m ready to work with you, see all of your successes, and watch you thrive in your business or career while creating your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
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