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In these three posts, I’m giving you 15 tips (plus a bonus in part 2) that you can implement today that will make next tax time less of a headache.
Here are the last five:
- Review your P&L-By-Month before sending it to your tax accountant.
I talked about reviewing the Budget vs Actuals report each month throughout the year, but before you send your books over to your accountant, take a look through your P&L for the full year, ideally by month. (So there will be 13 columns of values: one for each month and then a total.)
Do the numbers make sense? Does anything jump out at you? Besides looking specifically at “the numbers” and seeing if anything is wrong, this is a moment to reflect on the year. The numbers you see tell the story of how the year went. You can probably see certain trends in months that remind you of specific celebrations or obstacles throughout the year.
- Review your balance sheet.
Just like your P&L, you should review your balance sheet. In addition to your bank accounts, credit cards, A/R, and A/R like I’ve discussed previously in this series, you should make sure any other assets and liabilities are properly stated, such as the values of inventory (discussed below), prepaid expenses, fixed assets, outstanding loans, etc.
If you don’t already have a spreadsheet or spreadsheets to keep track of the activity of these accounts, consider implementing that.
- Keep track of vendors who will need a 1099 (if you’re in the US) or T4A (for my Canadian readers).
A 1099 (or T4A) is a tax form that you send to certain vendors such as independent contractors to indicate payments that you made to them that weren’t through normal payroll.
QuickBooks makes it easy to keep track of who these people are. When you are setting up a vendor, simply check the relevant box in their vendor information. I prefer this “set-it-and-forget-it” approach when first setting them up to constantly looking through my vendor list to identify vendors that need a 1099 but might not be set up in QB for 1099 tracking.
If you haven’t been doing this already, it probably does make sense to go through your vendor list and edit the relevant vendors so you can check that box.
- Review your inventory.
Another important balance sheet item to review is your inventory. If you are tracking inventory in QuickBooks, you should make sure two things are correct: the Quantities On Hand for each inventory item and the dollar value QB is calculating for that inventory.
If you find that either of these is off, you probably need to make an adjustment. Your tax accountant should be able to help you out with it, and it’s a lot less of a hassle to do that before they prepare your tax returns.
- Set non-business goals.
For this last tip, I wanted to take a step back from the business and bookkeeping. Taking care of your personal life is one of the most important things you can do to take care of your business. It’s important to find that work-life balance and not let work consume your life.
Plan a vacation, commit to a regular date night with a loved one, or study a new skill and read that book that you’ve had sitting on your desk for months.
Did this series help you? Are you going to start implementing some of these tips? Let me know the most helpful ones by commenting on the YouTube videos or emailing me at [email protected].