Archive for February, 2006

For the QuickBooks (QB) bookkeeper, a handful of end-of-year tips, most of which should be done before you send your books to tax:

1. Reconcile all your bank, credit card, loan, and line of credit accounts — The cleared balance on your QB “bank rec” should match the same number on the statement. Quality control tip: print the detailed version of the reconciliation report each time, and scan for uncleared transactions that should have cleared by now. Research and resolve.
2. Tie out payroll — Your company’s P&L for the year should match your payroll service’s end of year report with respect to salaries and wages, and payroll taxes, too. Investigate until all variances – and there are some common, valid ones – are known.
3. Tie out revenue — Make sure you have a copy of every customer invoice, and that they add up to the year’s revenues. This simple act benefits you in many ways: helps get the books ready for tax; locates A/R and filing system errors; serves as a general financial control; and strengthens your audit defense should the need arise.
4. Look for transactions out of date range — Pull a transaction list by date = all; look for December 2006 transactions – a common problem when we start a new year, because QB defaults to the current year if you don’t enter one.
5. Proof QB’s cash basis balance sheet — QB doesn’t always accurately convert from accrual to cash basis. We learned a lot about this topic from The Sleeter Group, which publishes a free online guide.They sell reference manuals, too, if you’re interested in more advanced learning*.
6. Advance the closing date —Once you send your books to your CPA, advance the closing date, set a special password, and don’t make any changes to the books without consulting your CPA and/or QuickBooks advisor. This can save you hundreds, sometimes thousands of dollars, in professional fees, because when people create tax returns based on your books, amending those returns if the data change is very expensive.

* To retain our unbiased, independent perspective, Small Business Logic Inc. receives no financial benefit from any third party resources that we might mention.

We love working with our clients’ CPAs: they provide valuable tax counsel, regularly saving our clients thousands of dollars and keeping them in compliance. Here are a few ways to get more from your CPA relationship.

1. Set a schedule. Know what information your CPA needs and when so you can meet all your tax return and estimated tax payment deadlines — for your business entity and personal returns. Leave at least a week in the schedule to comfortably review all documents before the deadline hits. Review time is critical for you to participate in the tax process.
2. Ask for some convenience items. It might not seem like much, but having your CPA run two copies of your tax returns ­ one bound and one unbound ­ will save you time and aggravation when you need to make additional copies to apply for a bank loan or sign a lease during the year. Ask for a trial balance, too, from the business tax return; you’ll make your bookkeeper or QuickBooks consultant very happy when s/he ties your books to the tax return.
3. Ask how much tax you’ll owe. How much to satisfy last year’s obligations and how much to satisfy this year’s obligations. Look at least 12 months out for cash flow planning purposes.
4. Ask for tips on how to reduce your income expense. Income tax is one of an entrepreneur’s largest expenses, but some CPAs don’t offer much tax advice unless asked. Ask regularly — not just once. And have a frank discussion of your risk tolerance along the continuum of conservative to aggressive tax strategy.
5. Tell your CPA you want to build personal wealth. Leverage your CPA’s experience working with other entrepreneurs and the wealth - building strategies they employ. Which strategies might be right for you? What you can do differently? Welcome — nay, solicit — your CPA’s critical eye.