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Accounting

Accounting Tasks at Year-End

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You might wonder why there are so many extra tasks at year-end. While the government requires much of the work, there is clean-up work and adjustments that need to be done to make the books accurate. It’s not always cost-effective to perform all of these updates monthly, so you’re actually saving money by doing some of them at year-end.

Here are just some of the items that are performed at year-end.

Tax-related:

  • If you have payroll, employees need to be sent their W-2s, and the federal and state government need a copy of the W-2s with a W-3 transmittal.
  • For employees, you must also have an up-to-date W-4 signed by them.
  • For employers, your federal unemployment 940 return is due.
  • If you have contractors, they need to be sent their 1099s, and the IRS needs the 1099s and the 1096 transmittal.
  • For contractors, you must also have an up-to-date W-9 form from them. You may also need to request an insurance certificate, or you may get a surprise at your workers compensation audit.
  • For vendors that claim exemption from sales tax, you’ll need to be sure you have an exemption certificate in your files from them.
  • If you pay sales tax annually, your return and payment are due.
  • Your personal federal, state, and local income tax and returns are due in the spring, and they can be extended until later in the year.
  • Depending on the type of entity your business is organized as, you may have franchise, federal and state tax returns to file. This deadline comes up sooner than the individual tax return due date.

Books-related:

  • Just about every asset on your balance sheet needs to be verified in some way or other:
    • Petty cash accounts need to be reconciled and reimbursed as of year-end
    • Bank accounts need to be reconciled with the bank statements. This includes PayPal.
    • Accounts receivable balances and all other receivables need to be tied to each customer and any amounts determined to be uncollectible need to be written off.
    • A physical inventory count needs to be taken and the inventory account should be adjusted accordingly.
    • Fixed assets need to be reconciled to their fixed assets ledger and depreciation should be properly recorded.
    • Goodwill accounts need to be checked and amortization adjusted.
    • Accruals, deposits, deferred accounts and all other asset accounts need to be adjusted if necessary.
  • Liabilities and equity need to be adjusted too:
    • Accounts payable balances and all other payables need to be tied to each vendor.
    • Liabilities that haven’t been recorded need to be added to the books.
    • Loans need to tie to lender statements, and interest paid on loans needs to be properly expensed.
    • The Equity accounts need to be checked and tied out to prior year balances.
  • Corrections and adjustments need to be made:
    • Any misclassifications and corrections need to be made on the books with adjusting journal entries or other classification tools.
    • If the client is a cash-basis taxpayer, a reversing journal entry needs to be made to get the correct tax numbers.
  • A clean set of reports can now be run and used.

Documents-related:

  • This is a good time to file and store your receipts in case you are ever asked for them. For long-term storage, thermal receipts should be copied or scanned in before the ink fades.

If you’re wondering why we’re so busy this time of year, it’s all of the extra work we have to do over and above the normal monthly load. If you have questions about any of this, just ask anytime!

Add Functionality to Your Accounting System with Apps

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Did you know that you can add apps to help increase the functionality of your core accounting system? The process will save you time and frustration. It is because every business is different that you may—and likely will—need these add-on features that aren’t already included in the accounting system you currently use. That’s where the apps come in: They provide a deeper functionality in the areas you need them. Take a look below at some examples we’ve put together.

  1. Payroll

Payroll apps help to simplify how you pay your employees. These payroll apps were created to help you implement an easy and automated method of managing payroll and all things HR-related.

Popular payroll options include Intuit’s many options, Gusto, ADP, OnPay, and Patriot.  Explore the different features of each app and find which one works best for you and your needs.

  1. Time Tracking

The best and most accurate way to keep track of an employee’s time is with an app. A wide range of apps can make not only tracking but scheduling your employees’ time simple, too. These apps include:

  • ClockShark
  • BigTime
  • Time Tracker
  • TSheets
  • And more!

Again, each app will offer different features. For example, most have timers, but only one might offer geofencing, so find the one that’s best for your business. Regardless of which one you choose to use, though, you will quickly discover how much time and energy you save without having to do time tracking manually.

  1. Inventory

Need more functionality to better manage your inventory? If you run an ecommerce, retail, or wholesale operation, you may need an inventory app to give you more features. Back order functions, drop ship handling, and recall functionality may be required depending on what you sell.  Here are some popular apps for inventory:

  • SOS Inventory
  • BigCommerce
  • Unleashed

There are also many ecommerce apps in this space: WooCommerce and Shopify, to name a few.

  1. Cash Flow

Dozens of apps exist to help you manage your cash flow as well as get funded:

  • CashFlowTool
  • Cash Flow Frog
  • PayPie
  • Chata.ai
  • FUndbox
  • Blue Vine
  • Fundera
  • And too many to list

Managing your cash and debt are important areas and ones that are easy to find to help you get quicker answers to your questions.

Now that it’s 2020, try working smarter, not harder. Add-on features can help! Remember, the examples listed above are just a few apps currently available. Determine what you need for your company to make better decisions, and then look around for the perfect app.

And, if we can help you implement your ideas faster, feel free to reach out to us anytime.

Cool Tech Tools: Fathom

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If your eyes glaze over when you’re presented with financial statements for your business, you’re not alone. Many entrepreneurs benefit greatly when they can see their financial results in graphical and chart formats. Fathom is the perfect tool to help your numbers come alive so they can become meaningful for you.

Fathom is a company based in Brisbane, Queensland, Australia and founded in 2011. The product is also named Fathom and is a cloud-based software application that crunches accounting data and provides multiple views that make analysis easy. In accounting terms, we call this type of software by many names: Financial Dashboard; KPI software, where KPI stands for key performance indicators which are metrics that help you measure your business results; and Business Intelligence (BI) software.

Fathom can present your accounting data in multiple insightful views:

  • KPIs – Popular KPIs are pre-loaded, plus you can create and calculate your own. Fathom handles financial KPIs like the current ratio or debt-to-equity ratio, and you can also enter non-financial data such as number of employees and customer satisfaction scores.
  • KPI explorer – This display takes on a wheel shape where green is good and red indicates room for improvement.
  • Profitability – This line graph shows your business’s breakeven point.
  • Cash flow – This bar graph shows in red and green your cash balance fluctuations.
  • Trend – This line graph allows you to see at a glance the direction account balances are moving over time.
  • Goalseek – This chart allows you to perform what-if analysis, set goals and measure your progress.

You can also generate predefined or custom reports in Fathom. The reports can be scheduled as well as exported to Excel.

Fathom does require a setup process. It integrates with QuickBooks Online, QuickBooks Desktop, Xero, and MYOB (which is popular in Australia). It’s included in the Advanced version of QuickBooks Online. The steps to set up Fathom include:

  1. Updating the data, which is mostly done through integration setup
  2. Adding your company profile
  3. Mapping Fathom to your Chart of Accounts, which is a very common setup step
  4. Selecting your KPIs, which requires some strategy work on your part
  5. Setting targets
  6. Enabling alerts if desired

There’s a lot to like about Fathom. If you feel like you’d like to start digging deeper into your business’s financial results to find opportunities for more growth and profit, then please contact us anytime.

Get Organized with This 32-Item Year-End Close Checklist

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A great way to make a wonderful start to 2020 is to wrap up 2019 feeling organized and on top of the world. Here’s a checklist of items that you can start on now to make your year-end close go smoother than ever before. And don’t worry if you don’t know how to do some of these tasks – that’s what we’re here for.

  1. Catch up on your books, especially if you do them only once a year. By doing it now, you’ll be able to get into your accountant faster this time of year and they will appreciate getting the work done ahead of their crunch time.
  2. Catch up on bank reconciliations in case they are not up to date. Don’t forget your savings accounts, PayPal, and any other cash equivalents. Void any old uncleared checks if needed.
  3. Review unpaid invoices in accounts receivable and get aggressive about collecting them, especially if you are a cash basis tax payer. Clean up any items that are incorrect so that the account reconciles.
  4. Write off any invoices that are no longer collectible.
  5. Ask employees and vendors to update their addresses in your payroll system so that W-2s and 1099s will reflect the correct addresses.
  6. Collect any W-9s that you don’t already have on file for contractors that will receive a 1099 form from you.
  7. Collect workers compensation proof of insurance certificates from contractors so you won’t have to pay workers comp on payments you have made to them.
  8. Collect sales tax exemption certificates from any vendor who has not paid sales tax.
  9. Decide if you’ll pay employee bonuses prior to year-end.
  10. Review employee PTO and vacation time and reset or rollover the days in your payroll system.
  11. After the final payroll runs, contact your payroll software company to make any W-2 adjustments necessary for things like health insurance.
  12. Set the date to take inventory, and once you have, make adjustments to your books as necessary.
  13. Write off any inventory that is unsalable. If possible, sell scrap inventory or other waste components.
  14. Prepare a fixed assets register, calculate depreciation, and make book adjustments as needed.
  15. Record all bills due through year-end, and reconcile your accounts payable balance to these open bills.
  16. Make loan adjustments to reflect interest and principal allocations.
  17. Perform account analysis on all other balance sheet accounts to make sure all balances are correct and current.
  18. Make any additional accrual entries needed, or if you’re a cash basis taxpayer, make those adjustments as needed.
  19. Get an idea of what your profit number will be. Choose whether you want to maximize deductions to save on taxes or whether to want to reflect more income. Decide what you can defer into 2020 or what you want to have as part of your 2019 results.
  20. Match all transactions with their corresponding documents – receipts, bills, packing slips, etc. – to make sure you have the paper trail you need.
  21. Download your bank statements and store them in a safe place.
  22. Download any payroll reports and store them in a safe place.
  23. Scan in paper documents so that they’re stored electronically.
  24. File any important papers such as new leases, asset purchases, employee hiring contracts and other business contracts.
  25. Prepare a budget for 2020 and enter it into your accounting system.
  26. Take a look at the 2020 calendar to determine which holidays you’ll close and give employees a copy.
  27. Review your product and service prices if this is the time of year you do that and make any changes you decide on.
  28. Update your payroll system for any new unemployment insurance percentages received in a letter each year.
  29. Update the mileage deduction rate if that rate has changed at the beginning of the year.
  30. Set a time with your accountant to go over 2019 results and get ideas on how to meet your financial goals in 2020.
  31. Review the metrics you’ve been using in 2019 and decide on the list of metrics and corresponding values that will take you through 2020.
  32. Celebrate the new year; it’s a wonderful time to gain perspective and be hopeful about the upcoming year.

Start 2020 with a bang and this year-end checklist, and feel free to reach out if we can help with anything.

Using Custom Fields in Your Accounting Software

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Custom fields in your accounting software are data fields that you can define yourself. They are typically associated with customers, vendors, employees, and items, and they can help you store and categorize additional information about these stakeholders and your products and services in your business.

An example custom field that can be associated with customers is their anniversary date with you. You could also decide to store their birthday, their spouse’s name, their favorite color, or their shoe size.

Custom fields add functionality to your accounting system. Here are a few examples of practical uses for custom fields:

  • Staff contact for customer – if customers are assigned a particular staff member, you can add their name in a custom field
  • Frequency of service – daily, weekly, monthly
  • Warehouse location
  • Type of customer; for example, hospitals, pharmacies, retirement homes
  • Referring physician
  • Preferred method of contact: email, phone, fax, text, chat
  • License number

Some software allows you to choose the type of custom field you want to add. In some cases, this allows for cleaner data as the data can be limited to a certain type or certain values upon entry. Here are the most common types:

  • Free form text – this is the default type; it can come as a single line or paragraph
  • Check box – choose one or more values from a limited number of choices
  • Radio button – choose only one value from a limited number of choices
  • Drop down – choose a value from a dropdown list
  • File upload – add an attachment
  • Image upload – upload an image that will be displayed
  • Date/time – enter a date or time
  • Number – enter a number; it can be currency, integer, or another mathematical type of number

Custom fields allow you to meet your company’s unique needs over and above what the software provides by default.  It’s a great way to make your data more meaningful. If you have some ideas for custom fields in your accounting software and want help setting them up, feel free to give us a call anytime.

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