Small business and startup tip: managing bookkeepers, accountants, and the end-of-year mishegoss

Ugh. Right? It’s December, so it must be time for those year-end activities so beloved by small business owners and managers. As much fun as it is (not), it is still necessary to go through the process of tying up the loose ends, making sure the books balance, and handing the entire package off to the tax accountant in time to get your returns back on time. Words that come to mind? Tiresome, boring, frustrating, annoying, essential, imperative, obligatory.

I guess it’s those last three words that have inspired me to put a few thoughts out on the topic. Here’s my approach: starting in October, I go through all of the reports with the bookkeeper (we have new one, by the way, and she’s awesome. Hi, Kona.) We look closely at our bank accounts, payables, receivables. I start with financial statements for the first 3 quarters: Does anything seem unusual? Do the actuals match up reasonably well to the budget and projections? If anything raises antennae, we drill down to look at detail together. Next we go through the quickbooks file. Spot checking as we go, we look for discrepancies in assigned accounts. Is everything properly categorized? Do transactions appear to fall in the correct budget categories? Typically we will identify a handful of mistakes made during the year and correct those in preparation for the next big step (which usually occurs in early December).

The phone call with the accounting firm. The bookkeeper and the accountants will usually start by discussing strategy and timeline, and reviewing some of the mistakes from last year that we might avoid this year. Dates are agreed upon, as are deliverables. We ship off the current reports to them, including the latest QB file. We still have a few weeks left in the year and will send the final QB file, which includes all of December transactions around January 4th or 5th. It is their goal to complete the year end work quickly, make any adjustments to the QB file and then “lock” it. They generate their own list of questions for us, among them might be:

  • Bank statements and reconciliations: are these done? For each account?
  • Credit card statements and reconciliations, too, don’t forget
  • Fixed asset purchases? Do we have a list of these?
  • 1099s? Have we a current list of any going out in January?
  • Insurance payments for employees and partners, etc.
  • Payroll records: are they complete and accurate?
If all goes well they will get the info they need and lock the accounts and create the “trial balance” or completed general ledger by mid-to-late-January. At this point, the tax accountant takes over. They use the year-end reports, QB file, bank reconciliations, etc, and get to work on the work that counts. Lots of questions here, too. She may want to know about:
  • Investor info for K1s (these will typically be ready by early-to-mid-March)
  • Meals and other “questionable” expenses
  • Independent contractors and 1099s
My goal this year is to have the QB file locked on January 10, trial balance to the tax attorney by January 20, K1s prepared and mailed out to investors by February 15, and tax returns signed off on March 15. Anyone wanna start a pool?