Your Finance Team

DIY Bookkeeping and Your Accountant

Owning and operating a small business can be a challenge every day, but the day you visit your accountant to have your taxes prepared can easily be the most stressful of the year. The stress is the result of the questions that undoubtedly flood your mind as the appointed day approaches. How much is my accountant going to charge me? How much will I owe? What do I need to bring? What did I bring last year? What is it that I always forget to bring?

If you have been doing your own bookkeeping all the pressure is on you to sort through your records and collect the relevant information and present it to your accountant in an orderly manner. The first question that comes to mind for most small business owners is “how much is this going to cost me?” The answer depends on a number of factors, such as; how is your business organized, C-corporation, S-corporation, partnership, the size of your business and the complexity of your return.

However, all of the factors boil down to a single common theme, time. Accountants bill by the hour and the longer it takes to prepare your return, the larger the bill. So you will want to be organized, because good organization on your part will reduce the amount of time your accountant has to spend sorting and looking for what they need. Bringing the right reports and records is the key to reducing your bill.

Financial Statements

If you are using an accounting software package like QuickBooks, and have been diligent about keeping your books up to date, there are several reports you can run that will save your accountant time and in turn you money.

Balance Sheet – A balance sheet will give your accountant a summary of your business’ assets and liabilities as of a particular date, such as December 31st. A balance sheet will tell you and your accountant if your books are accurate or not because as its name implies it must balance.

Cash Flow Statement – A supporting report for the balance sheet, this statement provides details about the information presented on the balance sheet. It has a breakdown of where the various sources of your business’ cash (income) have come from. For example, operating income, investment income, and loans are all listed here.

Income Statement – The most important of the three primary types of financial statement, it is often called a profit and loss statement. It paints a complete financial portrait of your business’ performance by summarizing your revenue (income) and expenses as well as your operating and non-operating activities. The bottom line of this report reflects your net profit or loss for the year and is where the term bottom line comes from.

Other Reports

Payroll Summary – If you prepare your own payroll your accounting software will allow you to create a payroll summary which lists each of your employees, their gross wages, payroll taxes paid and any other payments or withdrawals. If you use a payroll company they will usually provide you with a year end report shortly after the start of the new year.

Summary of Out of Pocket Expenses – If you have reimbursed yourself for your expenses either directly or through a service like Abacus your accounting software will already have this information recorded and included on your income statement. If you have not reimbursed yourself for some or all of your expenses you should provide your accountant with a summary of those expenses.

Summary of Home Office Expenses – If some or all of your business activities are done from your home, you may be eligible for the home office expense deduction. Your summary must include the total square footage (livable area) of your home, the square footage of your home office, or workspace, and the total number of rooms in your home. It should also include your total expense for utilities, your mortgage interest and any property taxes that you paid.

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