Now that the annual springtime flurry of activity that comes with filing your small-business tax returns has passed, you might think you can go on bookkeeping cruise control until you start processing 1099 forms next winter.In fact, it's important to follow bookkeeping best practices throughout every season. This advice can be particularly beneficial to citizens of Procrastination Nation. Start with this: If you use contract employees or vendors, make sure they submit a W-9 form before you pay them. That way, you'll have that information on file and won't have to chase it down at 1099 time.
Here are some additional suggestions to help keep your organization's bookkeeping in order all year long.
Set a Routine
You don't have to let the IRS dictate your deadlines. You can, and in many cases should, reconcile your books at regular intervals — possibly even on a daily basis, depending on your type of business. There are many ways to simplify and automate this process, including migrating to the cloud; the sooner you implement them, the better.
Even if you're faithfully recording all of your business transactions at regular intervals, it's still a good idea to take stock of your tax records at midyear. Doing so not only will make next year's tax season less stressful, but can also prompt you to categorize certain expenses and address your fixed-asset depreciation schedule.
In addition, a midyear bookkeeping review can provide valuable insights into the overall financial health of your business. For example, it can reveal how your actual numbers compare to your budgeted numbers. That, in turn, can provide a starting point for implementing course corrections over the second half of the year.
Finally, clean, up-to-date financial and tax records can be a lifesaver if you're hit with an unexpected audit or decide to apply for a loan. And if you're already paying off a business loan, a midyear review is a good opportunity to ensure the loan balances on your books match the balances of the lender.
"No Buts" Bookkeeping
When you add it all up (which, after all, is what bookkeeping is all about), there are plenty of good reasons to conduct a midyear review — and not a single good reason not to.