Most companies’ fiscal year end is around the start of a new calendar year. That makes sense for tax purposes and for making sure all of your yearly financials are recorded, but it can be an added stressor when it comes to tax preparation and filing. January through April is, without a doubt, the busiest time of year for tax teams and accountants. So while your tax team is already rushing to finish tax paperwork, file tax paperwork, and ensure that they haven’t made mistakes with your taxes, you’re also asking them to close out your yearly financials at the same time. This is a lot for anyone to take on, especially if you have a very small or inexperienced tax team. If you only have one bookkeeper or accountant, putting all of these tasks on him of her at once is very problematic. The likelihood of mistakes or oversights skyrockets during this time of year, and unfortunately, this is a time when you really cannot afford financial mistakes or tax oversights. So what should you do?
You should hire third party, back office experts to delve into your yearly financials and tax information to ensure that they are free of errors and as thorough as possible.
Aside from feeling good about having all your financial records and tax returns done correctly, there are several reasons why you need to ensure that your finances are being taken care properly. Let’s look at a few of those reasons, as well as some of the common mistakes of tax teams and the consequences you may have to face if your financial records are not in order.
Why do I need thorough and correct financial records, where even one mistake is unacceptable?
To Keep Track of Income and Expenses
This may seem like a no-brainer, but keeping thorough and correct records will help you maintain proper income/expense reports and balance sheets. It will also help you identify the sources of your receipts when deciding if something was a business or non-business expense. Keeping a thorough record will also assist you in properly claiming deductions at the end of the year.
To Know How Your Business Is Doing
All effective business owners know that record-keeping is absolutely vital if you want to succeed. You must have complete and correct records of all the money that comes in and all the money that goes out, and you must know where that money came from and where it is going. To budget properly, forecast well, and make a profit, you must have financial records, and they absolutely must be free of errors and as thorough as possible. Knowing how your business is doing and where you can increase profit and decrease expenses is the key to running a successful business.
To Have Assured Accountability to Your Board Members, Stockholders, etc.
If your company, like most, has a group of people to answer to, you absolutely must have complete and correct financial records. Your board members, donors, stockholders, and community members will demand accountability and accurate financial statements. If you cannot deliver, you will likely see your business go bottoms up before you can even figure out what happened. Many companies are required by a board to be audited or provide annual financial statements, and you need to feel assured that what you’re giving them is accurate and correct so that you can continue to run and grow your business.
To Face an Audit with Confidence
Audit is a scary word to most business owners, but what if you didn’t have to be afraid of being audited? What if you could face an audit with complete confidence, knowing that your financial records are completely free of errors and that they are as thorough as possible? With business audits being incredibly common nowadays, it is absolutely vital that your yearly financials and tax information is recorded and filed correctly and with zero errors. Many businesses assume their financial records are correct and complete, but when an auditor comes knocking, all too often business owners find themselves shocked and terrified at what was discovered within their tax returns and financial records. By utilizing the qualified team of experts at Back Office Support Solutions, you can rest easy that your financial records are being reviewed and corrected for accuracy and completeness.
What minor mistakes might I, or my accountant, bookkeeper, or tax team make that may go unnoticed but could wreak havoc on my business?
Not Reconciling the Books Every Month
This is one of the most common and avoidable mistakes that whomever is in charge of the books – be it the owner, accountant, or bookkeeper – can make. Taking the time to reconcile your books to your bank statements at the end of each and every month will help you catch small errors before they turn into big ones. Reconciling each month will also help you to have a better idea of your financial situation throughout the entire year.
Improper Categorizing
A common mistake is using too many, too few, or incorrect categories for your expenses when handling income and expense reports. The easiest way to avoid this often-made error is to ensure that whoever is completing this task is well qualified and highly experienced in doing so.
Misrepresenting Sales or Payroll Tax Owed
This mistake can be both accidental and intentional, and it can get you in huge trouble with the IRS. Make sure you account for sales and payroll taxes as you budget, and be sure to record those taxes owed in a proper way, being as precise and complete as possible.
Tax Submission Without Review
Quite possibly the most fatal error your tax team can make is submitting your tax documents without exhaustively reviewing them. Sadly, this issue is running rampant in tax teams and businesses across the country, leading to steep consequences and terrifying audits. Whether it’s due to lack of experience, a time crunch, or blatant neglect, tax submission without review is a huge problem and absolutely should not happen. You may not even know that it’s happening in your place of business, but bookkeepers often make significant mistakes recording financial information throughout the year, and those mistakes go unnoticed because your tax team is not actually reviewing your numbers at the end of the fiscal year.
The experts at Back Office Support Solutions are committed to integrity and thoroughness, and have extensive experience providing tax prep services and in working with tax firms. We also review the books to ensure they are accurate monthly or yearly. By completely reviewing every single number and file and form involved in your tax preparation, we will set you up for financial success and smooth sailing should you be chosen to be audited.
What consequences could I face if these errors are not corrected?
Overpaying
Paying the government too much money based on an error or oversight can be extremely frustrating. This is especially true considering you’ll be hard pressed to actually get your money back from the government. Paying money that you did not have to pay is a waste of your hard work and diligent effort that you’ve put into your business. Don’t let a tax team’s silly mistake put your finances in jeopardy.
Underpaying
If your tax team’s mistakes leads to your underpaying the government, you will be charged a daily fee until the balance is paid. The amount of the fee will vary, but a simple, avoidable mistake could potentially cost you hundreds of thousands of dollars, or even your business.
Yearly Audits
If you give the IRS reason to believe that you are consistently negligent in filing your taxes, they may send auditors to you year after year. Remember that an auditor’s job depends on their finding something wrong or out of place, so if you correct everything that needs to be corrected and you continue to file error-free and complete tax returns each year following, the IRS will most likely stop sending an auditor, as your correctness will have made their visit to your business obsolete.
How can I avoid error-ridden financial records and incorrect tax filings?
The easiest way to avoid all of the mistakes and consequences listed above is to hire the best people to check over all of your financial records. The experts at Back Office Support Solutions can provide you with exceptional and thorough tax preparation, in addition to accounting and bookkeeping services, QuickBooks assistance, audit preparation, accounting software management, human resources and payroll services, and financial analysis and strategic planning. Our experienced and highly qualified staff is fully prepared to take on your back office work, no matter where you are in the process of recording your financials and no matter how little or how much help you need.
