In many respects, running a business may be overwhelming. You’re working as a business owner to meet goals, interact with clients, and create an action plan for the following year. In the quest, it is simple to put off your bookkeeping responsibilities and promise to catch up on bookkeeping later. But it’s crucial to get your books in order.
Inaccurate and sluggish bookkeeping might result in greater taxes, trouble obtaining finance for expansion, and, in the worst case, cause you to close company doors. Many steps can be taken to swiftly catch up on bookkeeping if you’ve fallen behind and need to get caught up. In the following post, we will be going through the checklist for maintaining your messy books.
What is Catch up Bookkeeping?
It’s possible that you’ve found yourself in a situation where you held off doing your bookkeeping for several days, and those days extended into weeks and months. You now have to reorganize your books, which seems like an enormous challenge.
Businesses that may have neglected their own bookkeeping may benefit from catch up bookkeeping. Catch-up bookkeeping is the process of correcting your financial and accounting records so they are prepared for year-end taxes, audits, and filings. Catch-up booking is all about assisting you in getting your books back on track, identifying and fixing any errors, and preparing you for tax season.
Year-End Bookkeeping Clean Up Checklist
If your books are messy then it will hit your business profits. Here is the checklist that every business should follow to reorganize its books.
Distinguish Personal and Business Expenses
Separating your personal funds from those of your company is the first step in bookkeeping. If you utilize the same accounts for personal and business expenses, you expose yourself personally to liabilities incurred by your company. You also lose the opportunity to write off company expenses as such if you don’t separate the two accounts, which could result in higher tax liability. If your company has its own accounts, you can also establish a separate credit history for it. However, if you use your own, your company will adopt your credit score, which will restrict your capacity to borrow money and make you personally responsible for any debts your company accrues.
Assemble All Your Receipts
Assemble all of your invoices, bank and credit card statements, and any supporting documentation for every business expense for the months that you are behind. If you can’t find the ticket for a $5 coffee, don’t worry; the IRS only asks for receipts for purchases that total more than $75.
Invoices
Locate all of the invoices you’ve issued to clients and group them together in one location. Make a note of any unpaid invoices that may exist. You can calculate your company’s income or revenue as well as your receivables (what is owed to you) using the invoices and their status (paid or unpaid).
Check your client accounts to make sure all invoices have been sent and paid for. You’ll record things in different ways depending on whether you utilize the accrual or cash accounting system. Send out outstanding invoices and pursue unpaid bills. If you encounter the problem of some clients not repaying despite your best efforts to pursue them, you might be able to write those off as a bad debt expenditure.
Debt Collection
There are occasions when you’ll have bills that are past due for a very lengthy time. You might have to stop losing money at some time. You need to make a deliberate attempt to gather the debt before you can do this. If it fails to work, you can use the non-accrual experience technique or accrual accounting to pay off the loan.
Bills from Vendors
Organize all of these invoices and bills if you’ve paid contractors and suppliers so you can easily find them in the event of an audit. If you don’t have all of your bills, just ask your suppliers and contractors to send you the ones that are missing by getting in touch with them.
Reconcile Your Bank Accounts
After gathering every receipt and bill, another activity that businesses should include in their catch up bookkeeping checklist is reconciling the bank accounts. In order to ensure that your accounting records and credit card and bank statements are exactly the same, you must perform an account reconciliation. You can take the help of bookkeeping software.
Your bookkeeping software should be updated with the appropriate category for each transaction in your account. Every transaction on your bank statement should be compared to the equivalent transaction in your records. Find and correct the inaccuracies if the numbers don’t add up. Reconciliations help to confirm the accuracy of your records.
Gather Forms W-2, W-9, and 1099
You must provide a W9 and Form 1099 to every contractor for whom you paid more than $600 in the previous tax year. It is ideal to send a W9 to a taxpayer as soon as they begin working for you because that form asks for the taxpayer’s details.
Choose a Professional Bookkeeping Service
You may find it difficult to manage the task. So, by employing a reputable bookkeeping company, you can rapidly catch up with pending bookkeeping. They can arrange all of your documents and sort through them to ascertain the financial standing of your business. They can inform your business of any prospective tax liabilities as well as tax breaks. Also, you’ll spare yourself the effort of going through your tax records, freeing up time for activities that will benefit your company more. However, the cost of hiring a bookkeeper can affect your budget a little. However, it is worth it.
Consequences of Backlog Accounting
The rush at year’s end to organize all your records for taxes is a time-consuming and frustrating task that no one enjoys. If you are having backlog accounting, then your business may take a hit. There can be many consequences of poor bookkeeping.
Errors & Tax Mistakes
Even while a few careless mistakes can seem insignificant, they can accumulate over months and result in false financial statements and taxes. You don’t want to be paying taxes either too much or too little. If the information on the tax forms is incorrect, you may be subject to penalties equal to up to 75% of the underpaid taxes.
False Report
You may make wise business decisions for your firm by keeping accurate books. You risk running out of money if you don’t have a clear understanding of your finances and avoid making unnecessary purchases.
Missed Tax Deduction Opportunities
One of your goals as a small business owner is to maximize tax deductions. Overpaying taxes can arise from a few missing receipts amassing over the course of the year because you won’t be able to deduct them as expenses.
Money Flow Problems
You are towing a risky cash flow line if you don’t catch up on past-due invoices, which could ultimately cost your company. Thus, it is necessary to clean up your accounting records.
Problems Obtaining Funding
Your loan application or investor presentation may suffer if you are in a position to grow your company but haven’t caught up on your bookkeeping.
How Much Do Catch Up Bookkeeping Services Cost?
Prices may differ slightly depending on the business you select and how far behind your books you are. How thoroughly you have prepared your financial records and receipts might also have an impact on the catch up bookkeeping price. For instance, reconciling your bank accounts may take some time, which may increase the price of these services.
Organizing and cleaning up back months’ worth of accounts will determine how much accounting catch-up you need to do. For each account that needs catch up bookkeeping services, a company may normally anticipate paying just $99 per month.
This will grow in accordance with a number of variables. To obtain a quote that more accurately reflects your needs and current financial condition, we advise contacting with bookkeeping experts.
Frequently Asked Questions
What are the benefits of catch up bookkeeping?
● It helps in determining how well a business is doing.
● Moreover, you will have organized financials.
● You can forecast your finances and prevent tax offenses and penalties by keeping up-to-date documents.
● It helps to adapt to your financial limitations.
What distinguishes catch-up bookkeeping from continuous bookkeeping?
While catch-up bookkeeping is intended to handle the backlog, ongoing bookkeeping services maintain your company’s accounts in real-time.
Who would be the best person to catch up with my books?
By bringing in an accounting staff, you can manage it internally and collaborate more closely with them. On the other hand, you can employ an outside company to manage the catch-up while you or your internal staff take care of current transactions.
What happens in a catch-up task?
Catch-up bookkeeping is all about focusing on incomplete activities and fixing accounting errors. The catch-up bookkeeper or team will start by going through old company financial statements and gradually work their way up to the current throughout this procedure.
