It's a new year and a chance for a fresh start and that includes your bookkeeping! The beginning of the year is a great time to get your books in order and set up habits that can be easily followed and kept up with all year long. The start of each New Year gives the business owner the opportunity to keep their bookkeeping current and complete. It is the ideal time to close out your books from the previous year and start the New Year fresh.
1. Closing Out the Previous Year: Closing out the books for the year can seem like a chore, but it's more productive to treat it as an opportunity to gather the needed information to see financial information from the year as whole. Create an income statement listing categories of income and categories of expenses. Subtract gross expenses from gross income to calculate profit for the year. Then create a balance sheet listing all assets and all liabilities. Subtract the liabilities from the assets to calculate current net worth. If using financial software a report can easily be created for an income statement and a balance sheet of all assets. Do this by using the reports features.
2. Evaluating Your Previous Year: Compare and evaluate your financial situation and set goals that are specific for company needs. This process provides an opportunity to see trends and potential problems in ways that can be difficult to spot from the regular day to day operations. Always pay close attention to the income statement. The information it provides helps to assess whether too much is being spent on any one any category of expense and whether resources are effectively allocated in keeping with different types of revenue streams.
3. Taxes for the Previous Year: Keep track of all the tax forms completed at the beginning of each year. Complete the forms as early as possible. The process of completing them will show total tax liability and enable you to budget to pay these taxes by the end of the month or when they are due. If using financial software this information can easily forecasted in the payroll center or forms center.
4. Starting the New Year: Set up spreadsheets, ledgers or financial software for the current year. Set goals for keeping up with the bookkeeping process, based on your experience of closing out the books from the previous year. For example, if the year-end process of finishing out the books was more work than necessary because the ledgers were two months behind, or bookkeeping within the financial software, goals will need to be set to update the books every week.