Year-End Tax Finalization requires businesspersons to perform more than the usual monthly, fortnight, or weekly tasks. That’s the reason why most businesses prefer choosing a year-end tax finalization service. Finalizing your financial statements at the end of the year is a daunting task. Without proper knowledge and expertise, it requires extra time and effort to complete the process. Successful business people follow a specific stepwise guide to finalizing the taxes to counter their yearly accounting brainstorm.
You need to know a few things before getting to the year-end accounting process. They are found to ease a business’s tax finalization process to a simpler level.
10 Tips to Follow Before Year-end Tax Finalization
Year-End Finalization is a tough task, so here are the most important 10 steps you need to follow.
- Find out what to include
- Find out what to exclude
- Reconcile salaries before final payroll
- Review payrolls dates
- Issue all payments before 14th July
- Pay superannuation guarantee contributions early
- Stay up to date with changes in compliance
- Create a separate copy of the account
- Let the account manager review your records
- Find out your employees’ arrangements
Following these tips will allow you to finish the yearly financial statements without any hassle. Now, let’s learn to finalize the year-end account statements.
Stepwise Guide To Year-End Tax Finalization
Before the clock strikes midnight, you have some accounting tasks to follow as a businessperson. Your accounting books need to be prepared and kept up-to-date to make them ready for the transition in the new year.
Ensure that you tick mark the following 8 procedures before the year-end tax finalization.
- Gather & analyze financial statements
- Collect past due invoices
- Account for inventory
- Organize the business recipients
- Reconcile bank accounts and credit cards
- Review account payables & receivables
- Back up the information
- Get necessary documents ready
Gather & Analyze Financial Statements
Financial statements act as the lifeline to every business, irrespective of its size, as they contain a glimpse of where your business is standing financially. Also, financial statements allow you to analyze your business’s past and current financial condition. Further, it enables you to forecast your business’ future & check the places where it is lagging behind.
Read More:- Top Reasons Why Bookkeeping Is The Backbone Of Small Businesses
In short, financial statements help you keep a health check of your business while letting you know the problematic areas. Furthermore, well-prepared financial statements also help minimize tax during year-end tax finalization. Thus, there are a few financial statements that you as a small business owner should always keep handy, including:
- Income statement
- Cash flow statement
- Balance Sheet
A P&L (Profit & Loss) account is your business’s income statement, summarizing its expenses and revenue. In total, your income statement is a record of all the money you have got or lost throughout a specific period.
Here are some things that you can see in your Income statement
- Tax expenses
- Cost of goods sold
- Operating expenses
- Other financial losses and gains
With the help of an income statement, you can find your business’s bottom line by comparing money gained from the business expenditure. Furthermore, comparing each year’s Income statement to that of the previous year helps to calculate business success.
Cash Flow Statement
Recording your business’ incoming and outgoing cash, a Cash Flow Statement only records cash transactions, not credit. Further, a positive cash flow statement shows that you earn more than your business spending.
Keeping track of your cash flow statement throughout the year helps find the flaws and predict the future cash flow of your business.
Your business Balance Sheet shows the financial face of your business through its assets, liabilities, and equity.
The main aspects of your business balance sheet include:
- Assets: What your business owns (land, furniture, machinery, etc.)
- Liabilities: What your business owes (creditors, loans, etc.)
- Equity: Money left over after paying the expenses
The balance sheet helps you find any discrepancies made while preparing the financial statements. While allowing you to correct your financial information, a balance sheet gives you a final overview of your business’s financial standing. Further, this helps you with year-end tax finalization. Also, if you find the whole financial management process overwhelming, you can outsource it to a year-end finalization service provider.
Collect Past Due Invoices
Try collecting the due invoices before the year-end tax finalization or wrapping up your books for the year-end. It includes putting-in effective leg work and collecting the unpaid dues before the year ends.
Well, a few customers will always pay with just a reminder while the others need a nudge. Don’t know what to do if a customer won’t pay? Well, then you can:
- Set-up invoice payment terms (setting up payment due dates)
- Document the payment process
- Stay connected to customers with past due invoices
- Establish a payment plan that suits both you & your customer
Always maintain a professional tone while reaching out to customers for pending past dues. Also, it’s important to be respectful, polite, and patient throughout the whole process of collecting unpaid dues.
If you can’t collect the money yourself, you can always hire outside help. There are experts providing debt collection service, year-end finalization service, and others.
Account For Inventory
Getting the accurate inventory count in hand is important as otherwise, you may face inventory shrinkage. Thus, complete an inventory check before closing your accounts and year-end tax finalization. Maintaining accounts for inventory at year-end helps you know the expenditure made on inventory. Furthermore, it will help you plan next year’s inventory requirements, especially for sale seasons.
Organize The Business Recipients
Organizing your business receipts and tidying them up prevents the risk of sloppy & inaccurate books. Furthermore, messy accounting records can increase the chances of further mistakes and put at risk the financial condition of your business. Also, you may end up paying more tax than required at the year-end tax finalization.
To keep your receipts in order before the year ends, you should:
- Sort them according to types of expenses
- Use folders and labels to find them easily
- Organize them in a chronological order
- Store them digitally on your PC/desktop
Reconcile Bank Accounts & Credit Cards
Reconciling your bank accounts & credit cards help you verify your accounts with your bank statement. It helps you identify duplicate or missing transactions helping you prevent any mistakes in your year-end accounting records.
To reconcile your bank accounts & credit cards, simply verify them with your accounting records. Also, if they show any difference, dig deeper to find out its cause and then rectify your financial statements.
Review Account Payables & Receivables
It’s important to settle your outstanding accounts before the year ends. And thus, reviewing account payables & receivables is an important step to follow before closing year-end financial statements.
In account payables, check out the outstanding debts and their due dates and clear the ones you are late for. Also, check your account receivables and notify your debtors about the outstanding bills you should receive.
Back-Up The Information
The worst nightmare you would like to see is your important accounting information goes missing. Thus, take a backup of the important accounting information to ensure that your accounting data is safe.
For this, you can print out your important accounting information and save it as accounting records or make a separate folder on your desktop. Further, for extra security, you can save the data to a hard drive or save it at any other safe spot as well.
Get Necessary Documents Ready, If Applicable
If you use an accountant in any shape or form for your business, like hiring a year-end finalization service, then this point is for you. Make sure to get the necessary documents ready for your accountant to allow him to maintain proper accounts.
Communicate with your accountant for the documents he needs to prepare and maintain your accounts. Also, if you use online software to avail of the year-end finalization service, you can easily grab the necessary documents for year-end tax finalization.
Now after reading the undeniable essence of stable account finalization and the hustle behind the process you must be wondering where to get the service? Don’t fret and visit Wire IT Solutions for year-end finalization service and other accounting needs to save better on year-end tax finalization. With Wire IT Solutions financial experts, enjoy cost-effective and accurate accounting services along with time-effectiveness. Get your books finalized today!