As a small business owner, you’re likely wearing many hats—juggling everything from product sourcing to inventory management, front-end work, human resources, marketing, and more. With a mile-long to-do list, bookkeeping often falls by the wayside.
In fact, a curious revelation emerges as 60% of owners confess to lacking sufficient knowledge in bookkeeping. Yet many of them still take on the challenge of handling their books, resulting in costly errors. Meanwhile, the ones who have accounting knowledge still struggle as 70% don’t have an accountant.
Keeping books up to date is a hectic task, especially when you don’t have enough expertise or process in place. As a result, daily bookkeeping activities like categorizing, recording and reconciling transactions, invoicing, customer billing, and more remain pending.
No wonder, messy books can lead to:
- Tax penalties
- Difficulty in managing expense
- Missing growth opportunities
- Poor cash flow management
- Bad financial decisions
Wondering how to catch up the bookkeeping backlog toward the last session of the financial year? Here’s a step-by-step handbook that helps to catch up on bookkeeping tasks effectively and efficiently.
Clear Your Bookkeeping Backlog & Get Back on Track
Tax season is around the corner, you get bogged down to catch up bookkeeping.
58 percent of business owners working 60 or more hours a week said that bookkeeping was particularly draining.
But for this, you can’t overlook a very merry and joyous time of the year – Christmas. So, how to prepare your small business for the holiday rush. Let’s get down to your business and put year-end accounting in order.
Gather Financial Documents
Bookkeeping cleanup starts with the collection of the receipts, invoices, bank statements, expense reports, and other relevant financial documents. Diligent analysis of these documents will help you understand how the financial activities were conducted throughout the year.
“In the realm of small businesses, accurate financial records can be elusive, often due to limited resources or lack of knowledge about their significance. Catch-up bookkeeping with an extended team can help resolve this issue, enabling SMB owners to have a reliable financial picture through accurate records and timely account reconciliation.”
Once you gather financial documents, your bookkeeper will have to organize and categorize available data. In this process, the bookkeeper will identify and work through customer invoices, bank statements, debt collections, business expenses, vendor accounts, and more to ensure that all transactions are properly categorized among income, expenditure, and other financial transactions. You will have a clear overview of financial activities and pending records, so it’s easy to update them.
Are bank statements not aligned with your internal records? Invoices and payments mismatched? That’s where your business is in dire need to compare transactions with your vendor, bank, and credit card statements.
Of course, this process is tedious, but seeking help from outsourced accounting professionals can help you to identify errors that you may have made in previous steps. The professionals fix any errors, ensuring the balance in your bank statement reconcile with the balance in your company records.
Segregate Business & Personal Expenses
Mingling business and personal expenses is common among small and medium business owners, making the bookkeeping process more complicated. Also, this can lead to inaccuracies in month-end closure.
Collect W-9s, 1099s, and W-2s
As the end of the year approaches, ensuring compliance is paramount. You need to streamline collecting W-9s, issuing 1099s, and reporting W-2s to meet Internal Revenue Service (IRS) requirements.
The Internal Revenue Service (IRS) mandates small and medium businesses to issue these reports, necessitating the maintenance of accurate records year-round. Keeping your books in order ensures precision in January when you fill in these forms to report various types of income, such as contractor payments (1099s) and employee wages (W-2s).
Don’t worry if things get a bit messy—catch-up bookkeeping helps you untangle the mess before it’s too late.
Review Chart of Accounts
The chart of accounts is the backbone of your financial story – a bookkeeping skeleton. It outlines all your vital business’s financial accounts and categorizes into assets, liabilities, income, expenses, and equity. Ensure every account is correctly labeled to sidestep confusion down the financial road.
Consider this cautionary tale: Once, a business owner got a tax audit from the IRS as their expenses soared, but Cost of Goods sold (COGS) remained relatively low. Moral? Every transaction counts, and that’s why you must record all your entries accurately.
Transform Accounting Process
40% of businesses say that bookkeeping is their least favorite task.
Perhaps unsurprisingly, bookkeeping usually isn’t fun for most small and medium business owners. It’s all about cold hard facts — the truth. When you witness your business expenses piling up and income trickling in, it can be a tough reality check.
35% of businesses are stressed about making bookkeeping errors.
Fortunately, managing backlogs can be straightforward if the task is delegated to the right hands. Shifting your accounting process to an outsourcing firm helps to keep your book up to date and error-free, keeping you away from the stress during the financial year end. Audit-ready books allow you to stand on a solid financial foundation for 2024.
“Maintaining up-to-date bookkeeping records through outsourcing is an investment for businesses aiming to enhance their reporting and increase funding prospects.”
You have a dedicated bookkeeping team to accelerate processing time, improve accuracy, comply with legal and financial regulations, streamline workflow, and have active support for monitoring and evaluation. Leave catch up bookkeeping to the certified professionals so that you can focus on core functions and revenue-generating tasks.