Small Office Solutions

To be successful in your business, one of your most important tools is financial analysis.  Accurate financial records can help you answer some very important questions like:  Are you making money or losing it?  Is your business on strong financial ground, or are rough times ahead?  A good bookkeeping system is the foundation on which all of this valuable information can be built. But, how much of it can you do yourself, and how much should you rely on an accountant to do for you?  Chances are, keeping financial records is probably not what you do best.  In all probability, even if you were a bookkeeper or accountant in your “past life”, it is not what you like to do, or you would still be doing it. There are varying degrees to which businesses can rely on outside accountants.  If record keeping is your absolute nemesis, you might consider paying an outside accountant to handle all your bookkeeping duties.  Keep in mind this is a crucial step.  My philosophy is “If you take care of all the little things, the big things will take care of themselves”.  Well, it’s not really that simple, but by taking care of the little things, you will at least be able to SEE the big things.  You can’t fix what you can’t see! 

The second option is to handle all the day-to-day bookkeeping on your own, but having an accountant handle less routine tasks, such as setting up your books, preparing adjusting and closing entries, preparing financial statements and tax returns, or helping you prepare a budget.  If you’ve been in business for a while, you might want to have an accountant give your bookkeeping procedures a one-time or periodic check up.

The third (and most cost effective) option is to just have an accountant to prepare a year-end financial statement and your tax returns. Unless you have opted to have your accountant handle the day-to-day transactions, there is certain information you will need to gather for him or her to do her work.  The following is a list of the information you need to provide to an outside accountant for the preparation of year-end financial statements and tax returns.

• Reconciled December Bank Statement – Reconcile the bank statement you receive in January for the period ending December 31.  Your accountant will need a copy of the bank statement, as well as the form you used for reconciliation.  If you are using a computerized accounting program (QuickBooks, Peachtree, etc.), this report can be printed out.
• List of outstanding bills (Accounts Payable) – These are the bills you still owe at December 31.
• List of outstanding invoices (Accounts Receivable) – This is the income that is due to you as of December 31.
• Trial Balance – This is a listing of the balances in every account in your Chart of Accounts as of December 31.
• Copies of all tax deposits (including payroll, if you have employees) – If you have made estimated tax deposits throughout the year, include copies of the forms you filed.
• List of any equipment purchased or sold during the year – Your accountant will need to know the purchase price of any equipment purchased.  If you have traded in or sold an older piece of equipment, your accountant will need the original receipt from when you purchased the item.

By providing the above information in concise form, your accountant will be able to prepare your financial statements and taxes with ease – which translates to lower cost for you.  Remember, most accountants charge by the hour.  The more work they need to do, the more it will cost you. 

Even though computer programs are available that will help you fill out your taxes, there is no question that a periodic review of your financial records by a qualified professional is beneficial to your business.  In 2001 there were over 400 changes in tax laws – how would you ever keep up with them (or understand them, even!).  There is no substitute for a personal relationship with someone who has your best interest (your success!) at heart – someone who knows the laws and knows how they pertain to you and your business.  An accountant is not just a numbers cruncher, they can also be a trusted business advisor.

Submitted by: 

Doralee Billings