Guest Post - Lisa Depew - Owner, Accounting by Design, CPAs
It’s coming to that time of year when we start thinking about the soon approaching financial year-end.
For some, just the thought can be stressful. But the truth is, it doesn’t have to be! With a little bit of prep work, you’ll be able to pave the way for a smooth year-end process with your Accountant, not to mention ensuring you avoid any expensive emergency catch-up bookkeeping work or penalties for late tax filing.
So, to help you get prepared, here are my top 4 year-end tax tips for interior design firms:
1. Ensure your bank/credit card account reconciliations are up to date:
- Identify any outstanding items on your bank reconciliations that you’re not expecting to show up on your statement(s) in the future – These might be mistakes that need to be adjusted.
- If you need bookkeeping assistance, secure it now to avoid the rush during tax season when support can be challenging or expensive to obtain.
2. Review your Balance Sheet account balances to determine if adjustments need to be made:
Accounts Receivable – Do you have outstanding invoices that you’re still waiting to receive payment for? If you've given a client an invoice and they haven't paid yet, the time is now to do those follow-up calls. If the client has decided to not pay the invoice (or if there's a problem), you may want to consider writing them off as bad debts (with sales tax). This will reduce the pain of any income tax or sales tax owing on the invoices.
Accounts Payable – Make sure that everything in your Accounts Payable is actually something that you owe. If not, it might be due to mistakes such as expenses or invoices being entered twice. If this is the case and you’re having trouble fixing it yourself, ask someone for some bookkeeping help so they can correct it for you.
Retainers / Other client deposits – Are they still valid? If a project, for the most part, has wrapped up and some fees were never billed, confirm whether you're going to return these to the client or take them into income. If you are a DesignDocs system user, you can take retainers into income by creating a miscellaneous invoice and adding a line item for the amount of the retainer, then applying the credit to the invoice.
3. Review your Income statement expense lines to detect any omissions or errors:
- Have all of your expenses been categorised correctly? Perhaps some expenses have been coded to the incorrect account lines and need to be reclassified. This is an important step to ensure that your expense reporting is accurate so you've got a clear picture of where and what you spent your money on.
- Have all expenses been included such as business expenses that were paid for personally?
- Consider expenses that you have incurred but that you might not have been invoiced for yet. Make sure that you’re remembering to input these expenses to reduce your net income for tax purposes.
4. Book a “Zoom” meeting time with your Accountant for mid to late January to review your preliminary financials.
- You’ll want to be ready to meet with your accountant to review your draft financials in January, so make sure your bookkeeper has finished your account reconciliations by the beginning of the month. Your accountant will be able to advise on any other write-offs etc. at this time so you can beat the tax rush. While everyone else is stressing out trying to figure out how to get their books brought up to date, you can breathe easy and focus on what you love doing – designing!!