As we approach the end of 2020, now’s the time to start preparing so your year end is as easy and stress-free as possible. It might still be November, but it is never too early to start taking steps to make sure you start 2021 on the right financial foot. This means cleaning house and making sure your books are in order well before it’s time to break out your 2021 calendar. Below are the top seven tips from the Constellation1 back office team to ensure you’re ready to ring in the new year.
Using the most updated software is especially important at year end to make sure your platform is accounting for all the regulatory changes in effect. If you use QuickBooks®, make sure you’ve upgraded your application to the latest release. This will ensure that you have access to the latest tax forms, especially 1099s. If you have Automatic Updates turned on, you’re all set. If not, follow the QuickBooks® instructions to update your application, available here.
Reconciling your bank and credit card accounts is important so you can keep track of your cash flow and ensure that everything balances. You should normally be doing reconciliations monthly, but it’s easy to fall behind when you’re focused on other things. Grab those bank statements and start reconciling your accounts now so you’re not playing catch up the last week of December. You’ll be glad you did, especially if you find something you need to fix.
Were your tax payments optimized in 2020? Ask your accountant about any new strategies or policies that you should consider for 2021 so you aren’t paying too much or too little tax. Tax policies change regularly, and your accountant will have the most up-to-date information to make sure you’re doing everything to the letter.
Make sure that you have a complete and updated balance sheet, which lists all your assets, liabilities, equity, and trial balance, which provides an overview of all your general ledger accounts and their balances. Are there any discrepancies? Make sure you review and correct them before year end.
Did you hire any new employees in 2020? Check to make sure they are set up properly in your system so that when it comes time to issue end-of-year income reporting documents (W-2s in the US or T4s in Canada), you don’t experience any delays. You can, of course, issue updated and corrected forms, but why not do it right the first time?
Check to make sure all your vendors, agents, and independent contractors are set up correctly so that everyone who needs one receives a correct 1099-MISC or the new 1099-NEC (in the US), or T4As (in Canada) at the end of the year. You don’t want to discover that there was an issue after the filing deadline.
Year end is the perfect time to sit down and look at your numbers. Did you grow this year, or are your numbers flat? Did you improve your profitability, or are you noticing a downward trend? The end of each fiscal year is an opportunity to assess your past goals and whether you met them, take stock of your other achievements, look for improvements, and set new goals for the coming year. By writing down your goals and making them official, you’re also more likely to meet them (as many psychologists agree).
The end of the year is a time filled with cozy winter nights and holiday preparations, and it is also the right time to set yourself up for success for the coming year. By starting to make your EOY preparations well in advance, you won’t be dreading turning your computer on the day after New Year’s.
If you’re looking for a versatile accounting tool to power your brokerage, consider Constellation1 Accounting and our entire suite of back office solutions. Better yet, see if for yourself!
*As originally shared on RISMedia.com