Keeping up with bookkeeping tasks is crucial for the financial health of your business. However, sometimes things get busy, and bookkeeping gets pushed to the bottom of the to-do list. When this happens, it's important to catch up on your bookkeeping as soon as possible to avoid penalties and ensure accurate financial records.
Table of Contents
What is Catch-Up Bookkeeping?
When Does Your Business Need Catch-Up Bookkeeping?
How to Catch Up On Your Bookkeeping
Have a Professional Review Your Expenses
What is Catch-Up Bookkeeping?
Catch-up bookkeeping refers to the process of organizing and recording all financial transactions that have been neglected or overlooked. It involves gathering receipts and invoices related to your business, reconciling bank accounts, separating personal and business expenses, and reviewing customer accounts for any outstanding debts.
When Does Your Business Need Catch-Up Bookkeeping?
There are several situations in which your business may need catch-up bookkeeping. It is important to catch up as soon as possible if you have fallen behind on your bookkeeping tasks due to a busy period or neglect. Additionally, having accurate and up-to-date financial records is crucial if you’re facing an audit or needing to file your taxes.
How to Catch Up On Your Bookkeeping
Gather receipts and invoices related to your business
The first step in catching up on your bookkeeping is to gather all receipts and invoices related to your business. This includes any expenses or income you may have overlooked or forgotten. Once you have gathered all the receipts and invoices, sorting and organizing them is important. This can be done by categories such as utilities, rent, office supplies, travel, or specific projects or clients. Then, you should record all the transactions in your bookkeeping system. This can be done manually using spreadsheets or accounting software. Make sure to include each transaction's date, amount, and description.
Review customer accounts for any debts
Next, review your customer accounts to ensure no outstanding debts. This will help you identify any bad debt expenses and improve cash flow. Reviewing customer accounts to check for outstanding debts is an important step in maintaining a healthy cash flow for a business. By identifying any bad debts, businesses can take appropriate measures to recover the money owed or write it off as an expense.
To conduct a review, here are some steps to follow:
1. Gather essential data like customer invoices, payment records, and aging reports for a complete view of outstanding balances.
2. Study the receivable aging report to identify and prioritize risky accounts, focusing on overdue invoices.
3. Communicate with customers with overdue payments - reminders, calls or discounts can encourage prompt payment.
4. Evaluate each overdue account considering factors like past payments and any signs of financial difficulty to assess debt recoverability likelihood
5. Determine bad debts when recovery seems impossible based on accounting standards and company policies after consultation with finance professionals
Reconcile your bank accounts
Reconciling your bank accounts is essential to ensure that your bookkeeping records match your bank statements. Compare each transaction from your bank statement with your company accounting records to catch any mistakes or discrepancies. Here are the steps to reconcile your bank accounts:
1. Collect necessary documents: Gather the relevant period’s bank and company accounting records.
2. Compare starting balances: Match your initial balance with that on the account statement, adjusting for any error or omission.
3. Verify deposits: Cross-check each deposit entry made in both institutions to confirm matching amounts and dates.
4. Checks issued reconciliation: Review all checked issues for accuracy of the number, date, payee, and amount against the provided list from banks.
5. Accounting for charges and fees: Make note of all service deductions listed by the bank on their statement compared to your own records
6. Outstanding transactions consideration: Note outstanding transactions such as uncleared checks or deposits recorded but not reflected on either side.
7. Identify discrepancies: Investigate any difference between what is reported at both levels & identify likely causes, including potential transaction recording errors.
8. Update incorrect entries if needed based on any discrepancies you noticed.
9. Compare ending balances, which should now match successfully.
10. Record every step taken carefully, accompanying it with supportive documentation regarding adjustments done for easy reference usage in making future decisions & assistance during audits.
Separate personal and business expenses
Separating personal and business expenses is crucial for accurate bookkeeping. Use distinct bank accounts and credit cards to avoid mix-ups. This distinction doesn't just enhance the accuracy of your records but also offers numerous advantages:
1. Legal and tax compliance: Distinct accounts allow effortless calculation of business income, easy claim of deductions, and trouble-free audits or assessments.
2. Financial clarity: Categorizing personal from business finances provides a clear picture of your venture's economic status for insightful decision-making.
3. Simplified record-keeping: Separate books streamline recording processes, saving valuable time by eliminating the need to sift through mixed transactions.
4. Increased organization: Differentiating financial resources means simpler transaction identification and categorization, which aids during audits or when seeking financing options.
5. Consolidated asset safeguarding: Separation shields personal assets from potential liabilities related to your company.
Collect W-9s, 1099s, and W-2s
Collect your employees’ W-9s, 1099s, and W-2s for accurate reporting and tax filing if you have contractors or employees.
A W-9 form is used to gather the contractor's or freelancer's taxpayer identification number or Social Security number, which you will need for tax reporting purposes. It also provides the contractor's legal name and address.
For contractors, you should issue a 1099 form if you pay them $600 or more during the tax year. The 1099 form reports the income you paid to the contractor, which helps them file their taxes accurately.
For employees, you need to collect W-2 forms, which report their wages, salary, and other compensation, as well as the taxes withheld from their paychecks. The W-2 form provides the necessary information for employees to file their personal income tax returns.
Have a professional review your expenses
If you are unsure about your bookkeeping or need expert advice, consider hiring a bookkeeping service or consulting an accountant. They can help you review your expenses, ensure compliance with tax regulations, and provide valuable insights into your business's financial health. A bookkeeping service can handle all aspects of your financial records, including recording transactions, reconciling accounts, and generating reports. This can save you time and ensure accuracy in your records.
In addition, a bookkeeping service or an accountant can review your expenses to identify areas where you can save money or cut costs. They can analyze your financial data to provide insights on improving profitability and efficiency.
Compliance with tax regulations is crucial for any business. A bookkeeping service or accountant can help you meet all tax obligations and file your returns correctly and on time. They can also guide tax planning strategies to minimize tax liability.
Hiring a bookkeeping service or consulting with an accountant can provide expert advice and insights into your business's financial health. This can help you make informed decisions, improve profitability, and ensure your financial records are accurate and compliant.
How can Taxfyle Help?
Between ensuring growth and managing employees, it’s easy for things to get lost in the shuffle. With Taxfyle, you won’t need to worry about managing your bookkeeping. You’ll be connected to a CPA or EA who will do your monthly bookkeeping through our platform. They can even file your business tax return. That way you can access your financial insights without lifting a finger. Let Taxfyle handle your bookkeeping while you focus on your business.
