Is your money a bit of a mess and you’re STILL trying to figure out how to clean everything up for the new year? There are a few super important financial tasks that you can do to close out the year so you can focus on moving forward- instead of dealing with a backlog of stuff to do.
This week on the Andi Smiles show I’m teaching you the 6 essential end of year financial tasks for your business that will set you up to start off the new year organized.
Watch the video below to get the whole shabang or check out the recap under the video.
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Why December is the perfect time for these tasks (2:55)
December is the perfect time to start closing out your finances for the year because we want to move into the new year looking forward not back. And I mean this from an physical, emotional, and energetic point of view. It can REALLY bog us down to scramble with last year’s stuff in the new year.
When it comes to bookkeeping we’re laggers. If you start the new year catching up everything from the previous year, you’re redirecting your energy into the past instead of working towards creating a better system for the future.
And this creates a cycle of always being behind. Because if you start the new year with 5 months of bookkeeping to catch up, and don’t finish until March, well then you’re already 2 months behind! This is how the financial work gets away from us SO quickly.
Another bonus to doing this stuff now is that you won’t be scrambling at tax time because many of these tasks are what you need to do to prepare for your taxes. When we scramble with our taxes we lose money because we simply don’t have the energy to be track all those deductions.
SO- by working on these tasks now not only do you save money, you’ll also have a much calmer tax season. And let’s be honest- taxes are stressful and if there’s a way we can make them even the tiniest bit less stressful, we’ll take it.
#1: Catch up your bookkeeping (6:24)
The first thing you want to do before you even start catching up your bookkeeping is to assess your current situation. Be really upfront with yourself about how far behind you and how much time you need to catch yourself up. Err on the side of overestimating the time you’ll need because- true life- shit comes up.
Next, identify what’s holding you back from doing your bookkeeping. It could be time, not knowing how to use the software, having questions about your business, or not knowing your tax deductions. It could be one of these things, or all of them stacked together. Whatever it is- understand WHY you haven’t kept up with your bookkeeping.
Now that you know how far behind you are and why- think about what you need so you can catch up. Is it a weekend off from your kids? A spreadsheet to put your data into (psssst– you can download one here)? Answers about your business? Get clear about what your needs are in order to complete this task.
Finally- take action on your needs! So, if you need a weekend off from your kids will your action is to find a babysitter. If you have questions about the software then your action is research. Take that first, concrete action to getting your books done.
How do you actually catch up your bookkeeping? I have a free 60-minute video training called Catch Up Your Books in 10 Days and it walks you through my step by step process for super fast bookkeeping catch up.
#2: Go through personal expenses & look for biz expenses (10:45)
This is what I called going deduction hunting. It’s a SCAN of your personal expenses for business expenses. You are not going line by line with a magnifying glass- rather you’re scanning and you’re looking for anything that might be a mistaken business expense.
Here are some examples of mistaken business expenses:
- You bought something on the wrong card
- You bought something for yourself personally and ended up using for your business
- You bought something online and had your personal card saved (think Amazon and iTunes)
- You purchased something for your business before you had a business account
The reason we’re doing this is because these are deductions that often get missed and missed deduction = leaving money on the table.
After you find these missed deductions you’ll make a list of them (either in a document or spreadsheet) with the following information:
- Who you paid
- Notation of what it was for
Because these are expenses that are coming from your personal account it’s super important that you notate what you bought and how it relates to your business. This ensures that if there ever is an issue you have detailed record of why this is a deduction.
#3: Go through personal expenses and log split expenses (14:04)
This is a similar process to Task #2, but I want to talk about them separately because these are different expenses you’re looking for.
Split expenses are not the same thing as accidental big expenses. Split expenses are expenses that are partially personal and partially business. So there’s one transaction that then gets split between business and persona.
Common split transactions that you’re going to be looking for are:
- Cell phone bill
- Home internet
- Home office costs (rent or mortgage, utilities, insurance, security system, etc.)
- Auto Expense costs if you’re using the actual cost method
Again, you’re going to scan your personal statements and find transactions that are split expenses and write them down. You’ll write down:
- Who you paid
- Total Amount
- What it is
- Deductible portions (Optional- if you don’t know your deductible portion yet skip this)
#4: Catch up your mileage tracking (19:04)
Most people don’t even bother with their mileage at tax time because they’re too stressed out about everything else and the can’t even deal with thinking about mileage. So we definitely want to do that at this at the end of the year instead of waiting 2 days before your taxes are due.
Business mileage is anywhere you drive for business purposes that is not your principal place of business. If you have an office that you’re at five days a week that’s considered your principal place of business and your commute from your home to your office is not deductible business mileage.
Everywhere else will count as business mileage. And remember- business mileage isn’t just driving to your clients, it’s also driving to meetings and run errands.
Here’s the quickest way to catch up your business mileage. First, start with a spreadsheet, your calendar, and open Google Maps. Then, go through your calendar and find all the times you drove for business and enter your starting locations (like your home or office) and ending location. Google Maps will give you the miles you drove. If it was round trip just double the miles. Easy!
The spreadsheet you’re making is your mileage log, which is something the IRS requires you have if you’re writing off your business mileage. Here’s what you need to include:
- Number of miles
- Where you went (client’s house, restaurant name, etc.)
- Purpose (why did you take this trip?)
#5: Deal with that pile of receipts (23:45)
Make a decision about how you’re going to deal with your pile of receipts and just do it. Paper clutter mentally bogs us down. Having something sitting on your desk for 8 months can start the dreaded spin cycle of, “Oh man I’m such a loser for not dealing with this! What’s wrong with me?!”
That’s a lot of emotional output. It doesn’t make us feel good and it doesn’t give us the motivation to move forward. Aa lot of the dealing with the receipt is really just about decluttering our financial cliffhangers so we start the year feeling fresh.
I highly recommend that at this point you forget about digital receipt organization if you have a bunch of receipts that need to be processed. Processing digital receipts can be time-consuming and at the end of the year, your goal is to get things done FAST.
For quick and easy analog receipt organization buy an accordion file with twelve compartments and label each compartment as a month. Then group your receipts by month and stick them in their compartment. This is the perfect balance of having your receipts organized enough to find what you need without having to spend hours on it.
#6: Send W9s to your contractors (27:04)
This is the point that we’re moving from closeout work to preparation work. If you file 1099s for your contractors, now is the time to start collecting W9s from them.
A W9 is a form that collects information from your contractors that you need when you file a 1099. A big mistake people make is not collecting this form until January.
The deadline to file your 1099s is January 31st and you can imagine how stressful it is waiting for people to send back their forms as the deadline approaches. To avoid all that unnecessary stress, send out your W9s now and give people a December 31st deadline. The IRS has the W9 as a fillable PDF that you can download here and email to your contractors.
Also, shift your mindset from thinking, “I have until January 31st to file my 1099s,” to “I can start filing my 1099s on January 1st.” Doing this moves you from a passive, “I’ll do it later” state of mind to a proactive, “I’ll do this now” state of mind and will keep you from waiting until the last minute to file your forms.