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Best Way to Prepare for Year-End Closing? Start Early.
What!? The year is almost over!? That’s right – we have just about two months left in 2018! For many businesses, this means it’s time for year-end closing. Some of you might be wondering why we’re talking about year-end closing with several months left in the year. Many accounting teams wait until the end of December to begin preparing for year-end closing. They review information, contact vendors and employees for confirmation, and close out the books in one fell swoop. But why not prepare earlier and reduce your stress?
As an accountant, you always want to be thorough. Preparing ahead of time will make the closing process smoother, so you can ensure all your information is current for the start of next year. Keeping your information up-to-date, clean, and concise is extremely important. Here are some ways to prepare early for year-end closing.
Mark Inactive Accounts
If you don’t mark inactive customer accounts, vendor accounts, or items, it’s time to start. Unmarked inactive accounts can make your information extremely outdated. If you no longer work with a customer, vendor, or product, it’s important to mark them as inactive so they don’t show up during your daily accounting tasks. Of course, this doesn’t make them go away forever. You can easily access them again if you ever need to.
Most importantly: NEVER delete any account or item unless it was created by mistake. The information in inactive accounts and items is still important. If you delete them entirely, that information disappears and your previous year data will be incorrect.
Review 1099 Vendors (Subcontractors)
Tax season comes right after year-end closing. Many companies have both employees and 1099 vendors. Ensuring that everyone’s information is still correct is important. When you provide them with their 1099s for the year, yours and their information need to be exactly the same.
If you received W-9 forms years ago from your 1099 vendors, it’s probably a good idea to send another form for them to fill out to make sure that their information is still the same.
Determine Bad Debt
The end of the year is the best time to determine which customers are just never going to pay those old invoices. You’ve probably been chasing them for weeks or months, and possibly even gotten lawyers involved, yet no payment has arrived. Whether it’s a specific direct amount or an estimated amount based off calculations from a percentage, determining the amount of bad debt is key to writing it all off your financial statements and making sure your information is accurate. Keeping un-collectible revenue on the books can skew your revenue, accounts receivable, and net income records.
Let’s avoid the stress and time-crunch of closing your books and start using these tactics today. It might seem tedious, but it’s necessary for making sure all your information is accurate – which is exactly what accountants should strive for.
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