As you prepare to close the books on another year, you might decide that this is the best time to ensure that you've kept those books in good order. You should have an easier time getting assistance with questions or missing documents now than after the tax-season rush has begun or worse yet, after you're already in the process of an audit. These essential steps can help you prepare for an audit and even more, they can provide a vital piece of your business planning.
The Year-End Business Audit Checklist for 2019
To start gathering financial information and documents you may require, you can refer to this business audit checklist:
- Inventory counts: Business that distribute products will need year-end inventory counts. You should also make sure you know the cost of goods sold and the amount of goods sold for the year.
- Receipts: Either have receipts collected in your accounting software or ensure that paper receipts have been properly organized and filed. You might also reconcile accounts receivable and accounts payable, and take the opportunity to followup on any outstanding debts or bills.
- Financial reports: Some examples of year-end reports you may need include profit-and-loss, cash flow, and balance sheet statements. You may need these reports for taxes. Even more, they can help you keep track of your own progress towards goals during the year.
- Vendor information: The end of the year also gives you a good time to perform a quick audit on your company's vendor information. You might ensure that you have valid contact information for active vendors, delete vendors you don't use any longer, and get in touch with some potential distributors that have grown inactive but may prove useful in the future.
- Payroll corrections: According to the IRS, about 40 percent of small businesses incur average penalties of about $845 for payroll errors. Some examples of issues can include incorrect deductions or failure to account for taxable benefits. These days, managing payroll can get complex, so it might be time to engage HR services to help relieve the burden and avoid making expensive errors.
- Data backup and recovery: If your business relies upon vital financial, employee, vendor, or sales data, it's important to ensure it is well protected against accidents, physical threats, or even cyber crime. Most experts suggest having data stored in at least two physical locations, such as external hard drives, cloud storage, and hard copies.
Depending upon your type of business, you may not need to take all of these measures. Alternatively, some kinds of businesses might require others. Also, you may first think of using this checklist as a way to prepare for possible tax audits.
At the same time, you should find these reports and documents incredibly useful tools to internally audit your company to measure its health and business practices. After you've made certain that you've got your business books organized, it's time to create or review your business goals for the next year. You'll be glad that you have gathered, organized, and protected the information that you need to make good decisions.
By hiring am experienced CPA to handle your business taxes, you'll stress less and have reassurance in a seasoned professional. Contact us today to learn more about our tax services.