Getting your financial house in order takes a lot of work. It takes a lot of focus and understanding to get everything organized in a manner that will help you understand how your business performed during the year. It's not the easiest thing to do but it's also not the hardest. If you put your mind to it, you can do it. Now of course, I recommend that you hire an expert in this arena, especially if you are horrible at the number crunching game.
But if you must venture and do it yourself, here are 7 tips you can follow to help get your financial house in order.
- Remember that Cash is King. Every income or expense that goes through your cash account must be accounted for. Your bank account is your key source document for everything that happens in your business.
- Clean up your accounts receivables. You want to be sure that what is really owed to you is truly collectible. Plus you don't want to pay taxes on monies you will ever see. (This applies to accrual based tax filers.)
- Clean up your accounts payables. To be sure that you are able to get the best tax advantages you have to be sure all of your expenses you are obligated to pay are entered (for accrual basis filers) and then paid if they are due (for cash basis filers). The same holds true here as for receivables. You don't want to miss out on any chances of reducing your taxable income.
- Employee documentation. One of the first things you will have to do at the top of the year is process and deliver W-2s and 1099s. If you haven't already, go through your employee records and check and double check that you have the correct addresses and identification numbers to issue the W-2s and 1099s to them. This will help keep you off the IRS radar later in the year. And help you stay on target to have them out the door by the end of January.
- Tally up your mileage. Keeping track of your mileage is a pain in the rear. Trust me I know it. But without some sort of tracking tool, you put yourself at risk for having a tax deduction removed and owing more taxes. You can also use this as a cross check to make sure all your client visits are accounted for and ensure that you have accounted for any bills that you have yet to receive payment on. Now, I'm sure there are tons of apps out there you can use to track your mileage, but I use this simple spreadsheets to track mine. You can download a copy here.
- Scan, review, repeat. Once you have inputted everything in your accounting system, you want to be sure it's all in there as accurately as possible. The best way to do that is to scan your financials, make adjustments and then review them again. Keep repeating this step until your scan turns up zero errors.
- Develop a system to record it all. Having some sort of system to follow when tracking your numbers is what will keep you from losing your mind. It's the glue that will hold all of this together. This is your blueprint to do it all over again. Establish a simple routine that you can follow every month from here on out, and next year your financial house will be ready when your tax accountant calls next January.
What additional steps do you follow to keep your financial house in order?
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