Catch Up Bookkeeping: 6 Steps to Financial Organization
Have you fallen behind in your bookkeeping efforts? None of us are perfect, and you’re not alone. Running your own business is hard enough without having to worry about documenting everything you earn and spend. As those stacks of invoices, receipts, and other paperwork begin to collect on your desk, though, getting reorganized can seem like an impossible feat. But getting your books back into tax-ready shape is crucial to remaining compliant with the IRS requirements.
Catch-up bookkeeping may not be easy, but it means avoiding penalties, protecting your business, and saving more money in the long run. Whether you’re interested in performing catch-up bookkeeping yourself or hiring an expert to assist you, it’s important to know what’s involved so you can avoid falling behind again. Below, we’ll cover what happens when you fail to keep up, as well as an action plan that will get you caught up for good.
What Happens When Your Books Are Behind?
Bookkeeping is substantially more important than simply keeping track of cashflow. The primary purpose of your books is to provide actionable insight into the current financial standing and future financial potential of your business.
If your books aren’t effectively managed and kept up to date, how will you know if your business is struggling financially? Without that information, how can you steer your business in the direction of growth and success?
In short, proper bookkeeping is proper business management. Without it, costly mistakes can occur, which increases your chances of being audited, minimizes your tax deductions, leads to problems with payroll.
Worst of all, out of date books are both expensive to fix and take a long amount of time. So, while it’s always better to stay on top of your bookkeeping, we understand that it may not always be possible. Below, we cover an action plan you can use to catch up!
Catch Up Bookkeeping: Get Organized in 6 Steps
Step 1: Collect & Check All Receipts & Invoices
Sifting through all the invoices and receipts you received and sent out is the best place to start. Everything from business expenses and customer invoices to debt collections and vendor accounts are going to need to be organized and verified.
This is also the time to verify that every invoice has been paid and all expenses are properly outlined. If anything is missing or incomplete, you’ll want to immediately address those errors.
Step 2: Ensure Your Bank Records Have Been Reconciled
Next, compare each transaction on your bank statement with the corresponding entry on your own records. This is a great next step for checking you haven’t missed any important business expenses or important records, and for checking that your bank hasn’t made any errors of their own.
Step 3: Separate Your Personal and Business Expenses
Keeping your personal and business expenses separate is critical to protecting yourself. Retaining everything in one single account can make you personally liable for everything your business is.
In fact, if you have yet to separate your accounts, you should do so immediately. Opening a business bank account is a great start to separating personal from business expenses as you can better organize where income expenses are both allocated and documented.
There are many business structures you can leverage to create this separation and if you wish to discuss your options, we recommend talking with a professional to determine the best one for your current and future needs.
Step 4: Digitize Your Records
Going digital can help transition your bookkeeping into a streamlined system, creating an easier way to maintain your records. Depending on how much you have to digitize, the difficulty of starting this process can differ, but the results are always worth it in the end.
Additionally, you may find that many of your clients and vendors equally appreciate your digital system. From increased functionality to better quality control, the benefits of going paperless are nearly too many to count.
Step 5: Submit the Correct Forms if Working with Contractors or Employees
W-2, W-9, and 1099 forms are all associated with contract or employee dealings. For example, if you work with contractors regularly, you’re likely already familiar with the importance of W-9’s for obtaining taxpayer information.
However, if you are new to filing employee or contractor forms, here’s a quick primer:
W-2 Forms. When you hire part-time or full-time employees that are part of your regular payroll, you are required to submit a completed W-2 form for each payroll employee issued by your payroll provider. This form will allow you to outline the employee’s gross income along with local, state, and federal tax deductions. Failure to complete and submit this paperwork can leave you exposed if an audit is performed.
W-9 Forms. If you have any freelance or contractors on staff, you are responsible for completing and submitting W-9 forms for each contract or freelance employee partnering with your organization. The reason they require separate forms is so they can take out their own taxes when filing as a self-employed individual.
1099 Forms. Any contractors or freelance workers who receive more than $600 in the last tax year will receive a 1099 form. It’s crucial that your freelance workers and contractors submit accurate W-9 forms to reflect accurate data in their subsequent 1099 forms.
Step 6: Get a Professional Bookkeeping Service
With any business, time is money. As a business owner, it’s crucial to optimize every moment spent on your business, working smarter instead of harder.
While assessing how you allocate your time and resources, examine how and why you fell behind in your bookkeeping efforts as an opportunity for growth and restructure. Do you need an in-house bookkeeper, software solution to digitize your records, or perhaps an outsourced bookkeeping team with industry expertise?
By partnering with a team of outsourced bookkeeping experts, you can elevate your bookkeeping strategy, and rest assured that you won’t fall behind on bookkeeping tasks again. When concerning financials, correct form filings, and maintaining compliance, your books need to be as accurate and current as possible to avoid red flags, fees, or penalties from the IRS.
Trust Your Bookkeeping to Eco-Tax
As you can see, bookkeeping is essential for proper financial management, legal protection, and personal success. If you’ve allowed this important task to slip a little bit, don’t stress, but be prepared to put in the work it takes to course correct.
We at Eco-Tax are ready and here to support you through it all. To offer the best client satisfaction, our experts at Eco-Tax remain:
- Economical: We offer affordable, transparent pricing. Gain access to key services, industry experts & the technology you need to keep your business thriving.
- Experienced: Our CPAs, EAs, bookkeeping, payroll, and financial specialists have the education, training, and experience to help your business grow.
- Eco-Friendly: Working virtually allows us to go paperless. All documents can be quickly shared through our secure portal, and you can meet your accountant online anytime.
If you’d like to talk with our team about your catch-up bookkeeping needs, do not hesitate to contact us today and book a free consultation with one of our trusted advisors. We look forward to having a personalized discussion and creating a plan of action to give you the peace of mind that comes from knowing you have a partner in your accounting.