Posts by Joel Yoder, CPA:
- Cash Reconciliation
- Check to make sure that all cash has been reconciled and make special note of checks that have remained uncashed for an extended period of time.
- Verify that all checks – incoming and outgoing – have been recorded, and their status tracked.
- Collectability of accounts receivable
- Does your business currently have any bad debts? If so, have you taken the necessary actions to determine that the account in question is uncollectable?
- Once an account is uncollectable, take the steps needed to prove that determination and receive the benefit from it.
- Accurate Inventory
- The end of the year is an ideal time to take a physical inventory.
- An inaccurate inventory can greatly impact your profit – not to mention your ability to properly manage your resources.
- New/Disposed Fixed Assets
- Be sure to add all new assets (equipment, fixtures, etc.) to the correct accounts. Don’t let them become buried in your purchases.
- If you are planning to sell your company in the next 5-10 years, it is extremely important to keep an accurate record of your assets because they can help determine your asking/selling price.
- Keep a current record of all your liabilities and update it regularly to maintain accuracy.
- Make sure that all debts are tracked and recorded.
- Member Draws
- Check to make sure that your member withdrawal account is accurate. If there are any expenses you expected to see but didn’t, investigate and find out why.
- If after year end you happen to find personal expenses that were in regular expenses, your profit increases and so do your taxes.
This is a hectic time for business owners who are working to close their books on the previous year while strategically planning for the year ahead. For me, this is the time of year I find myself frequently fielding questions from clients who want to know if buying equipment will help them keep their taxes down.
Unfortunately, without the proper information, any answer I could provide would be about as useless as seeking business advice from a Magic 8-Ball. Fortunately, the answer really isn’t difficult to find, especially if you have a well-maintained balance sheet.
To determine whether purchasing equipment would be beneficial to your business from a tax perspective, I have to know what your profit looks like. And while it may be easy to pull out your profit and loss statement to find the answer, I would encourage you to take a look at your balance sheet as well. It’s capable of painting a detailed picture of your business and is a great tool that can help you make sound financial decisions for your business.
Before you make any decisions that could impact your business’s financial stability, make sure these six items on your balance sheet are accurate.
Your company’s profit is not just a number. Your profit is determined by a wide range of factors – and these are just a few. If you are really want to lower your taxes, make sure your bookkeeping is accurate before developing a plan.
Email Rea & Associates to discover more ways to increase your business’s profitability.
By Joel Yoder, CPA (Millersburg office)