If you are managing a small business, you know the importance of proper accounting of your finances. And since we are approaching the end of the year, it’s also good that you clear up the numbers, organize your expenses, assess if you made a profit, and evaluate if you need to adjust your budget next year. If you still have no idea where to start, we created a list of end-of-year accounting hacks for beginners just like you.  

Get an Accounting Software 

As always, we intend to help entrepreneurs to be more efficient with their businesses. And if you can get help without breaking your budget, then go ahead and maximize it. The support we are referring to is accounting software. 

You see, if your business has growing transactions and you are buying various materials from different suppliers, we encourage you to get accounting software. This is so you easily consolidate your finances. QuickBooks is one of the most popular ones, together with FreshBooks and Sage. 

Keep Digital Copies of Your Receipts

We understand that most transactions are now online, but there are still transactions where you are provided with hard copies of the receipts. In that case, make sure that you digitize it. Take a photo and properly store it on your computer or cloud.  

What’s good about having softcopies of your receipts is that you can easily pull out the file, and of course, it will not deteriorate.  

Categorize Your Business Expenses

Now, with the accounting software we mentioned above, you can easily categorize your expenses. There are several benefits of organizing your business finances. First, you can use it for tax purposes. In addition, transparency gives you a quick reference in making business decisions. You will be able to determine if you are overspending on a particular item  

But what are the common categories that you should take note of? We listed it down so you can easily determine your expenses and place them in their proper categories.  

Advertising and Marketing 

This includes your expenses for promotional materials such as print, radio, television, direct email, social media ads, and email marketing, to name a few. The production costs of your advertising and marketing materials should be added here as well. 

Business Vehicle/ Service 

Keep track of how much you spend on your cars for business purposes. This is not limited to gas and oil changes. But you also have to include the maintenance, repairs, insurance, garage rent, parking, lease or loan, and even tolls. 

Payroll 

More often than not, this takes the largest part of your expenses. By separately categorizing it, you will identify how much you need to spend on manpower. 

Employee Benefits 

Employee benefits are essential if you want to retain your best talents. This usually covers retirement benefits, paid vacation, childcare, medical insurance, and training, to name a few. 

Meals and Entertainment 

If you took your client for a coffee and discussed your business, that should fall in this category. In big companies, it is unfortunate that a lot of employees abuse this and would conceal their personal meals and entertainment expenses as a business one. Thus, draining your company’s budget. 

Always have a strict policy in place regarding this. 

Office Supplies and Expenses

Think about your computers, software, mobile phones, and even the littlest office supplies like paper clips. As much as possible, list everything down even the furniture as some of it may be tax-deductible.  

Professional Services

If you are outsourcing some of your services like graphic design or accounting, then all the money spent on that should go here.  

Rent and Utilities 

You must also categorize your rent or lease costs separately. Or if you are working from home, track all the utility costs like your electricity, internet, and phone bills. 

Travel

And lastly, you should add the travel cost, not just the ticket, but also the hotel, food,  and even the long-distance calls made during the business trip. 

Avoid Doing Last Minute Finance Consolidation 

Ideally, you have to input the data as regularly as you can. You shouldn’t wait for the end of the year to do all the consolidation. It’s one of the ‘end-of-year accounting hacks’ that you must remember. That way, you do not have to cram, and you will not miss a single transaction needed in your financial reports. 

Set Reminders to Regularly Review Your Finances 

In relation to the above, one of the ‘end of year accounting hacks’ that you can do right now is to plot schedules for next year on when you are going to review your finances. 

Again, doing so in one single blow or by the last minute can be exhausting as opposed to doing it every week or month. It will help if you set a calendar reminder as sometimes we tend to forget these things when we focus on operations. 

Create Monthly Goals and Projections For Next Year 

Before the year ends, you and your small team should be able to have monthly projections for next year. By knowing the potential performance of your business, you can also adjust your budget and even plot strategies that could increase your profit. 

Hire a Professional for Your Accounting Needs 

While there are tools that can help you, as mentioned above, it can be overwhelming to consolidate your business finances especially if this is your first time. In that case, you can ask a professional to help you. This is ideal if you want to understand accounting laws and regulations that you need to comply with. 

Don’t Forget Your Social Responsibility 

If your business is also profitable enough, then it wouldn’t hurt if you donate to organizations that might need your help. One of the groups you can consider donating to is Philly Fighting Covid. They are on a mission to have mass testing for COVID-19 for all Philadelphians. And at the same time, get reusable PPEs for those who need them.   

Don’t Forget to Reward Yourself 

Assuming that your business is already doing good and you can now spend more on your future, then always allot an amount for your retirement. You should prepare for it as early as possible. That way, you can enjoy the fruit of your hard work as you age. 

In addition, it might be a good time to get your own house. But of course, if you are just starting out, you can delay this plan and work on it when the stream of income is more fluid.  

While rewarding yourself isn’t technically considered one of the ‘ends of year accounting hacks’, we still recommend it so that you will be more inspired to grow your business.