Every year in the business world, one thing seems to happen too fast -- the end of the year; and all the accounting and bookkeeping tasks that come with it. Almost every year, small business owners are caught saying, “How did it get to be fourth quarter already?” The older we get, the faster time seems to fly, and for those in charge of “the books”, there is much to be done as the year draws to a close. Not only is it time to budget for the new fiscal year and prepare for tax time, but it is also the time for management and the accountant to analyze trends in the financial data and prepare for the next year.
Ending the Year in Quickbooks Online
Tackle year-end accounting functions by utilizing the built in features of the Quickbooks Online bookkeeping software. Here are a couple: 1) Automatic year-end adjustments
Quickbooks online bookkeeping software creates year-end adjustments based on the fiscal year set in the company settings. On the last day of the fiscal year, the equity section of the balance sheet will show a line for net income (or loss). On the first day of the new fiscal year, QuickBooks Online bookkeeping adjusts the retained earnings equity amount by the previous year's net income (or loss). Income and expense accounts are reset, so the net income for the new fiscal year starts at zero. These adjustments can be identified in Quickbooks Online bookkeeping reports (Example: QuickReport of Retained Earnings) but "QuickZoom" details on these transactions are not available.
2) Closing the books
It is recommended that the books be “closed” or locked for editing after all adjusting entries have been recorded for the fiscal year. A password can be established in the QuickBooks Online bookkeeping software to prevent changes from being made once the books have been closed. Enter a closing date in the company settings to protect transactions from prior accounting periods.
It is important to thoroughly review income and expenses before closing the books. Review the Accounts Receivable (AR) account for unapplied payments and outstanding invoices. Determine if the outstanding invoices should be written off. Discuss the relevancy of the following questions with your accountant:
What types of expenses can be written off to reduce your tax liability?
Should you defer any income to reduce the profits that may be liable to corporate taxes?
Be proactive.
Planning for the future is equally important as closing the books for your small business. The end of the year is a crucial time to focus on the financial health of your small business. Analyzing year-end financial data and reports is necessary to ensure the sustainable growth of your small business. Review the budget to actual income and expenses report. Where did you deviate and why? Use this information as a foundation for drafting next year’s budget.
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Need to hire a Quickbooks Online bookkeeper to help with the year-end craze? Contact eBookkeeping Solutions today for a free consultation.