An understaffed accounting department caused big trouble for the city of Spokane, Washington. During an audit of the city’s 2014 taxes, several errors surfaced, including revenue miscalculation, an overstatement of general fund expenses and inaccurate reports of debt changes.
While many of these mistakes were simple spreadsheet flubs — a matter of figures placed in the wrong spots in the city’s financial statement — the result was a multimillion-dollar miscalculation. Fortunately, the state auditor’s office identified these slips in time, but the lesson was clear.
Spokane now has a fully staffed accounting department and internal procedures to prevent future disasters. A large-scale issue like this should be a warning to small businesses: Avoid the kinds of errors that carry implications for your company’s reputation and bottom line by making a year-end accounting checklist your new best friend.
What to put on your year-end accounting to-do list
Here’s why the “winging it” approach to tax preparation doesn’t suit new companies: Not only does it threaten a potentially harmful financial fallout, it also damages company morale and paints you as disorganized.
Not having up-to-date books or a plan to file taxes — correctly and on time — may hinder growth. Plus, if your company reports payroll taxes or contractor 1099s, you may face costly penalties for not meeting requirements. That’s why establishing solid year-end procedures is so important.
And trust me: The earlier you do this, the better. It’s much easier to install an annual plan while the company is young and the tax requirements are relatively simple because filings get more complex as businesses grow.
No matter what industry you are in, including these items in your end-of-the-year rundown keeps your books in order and a CEO’s mind at ease:
1. Keep internal operations on point.
Now is a great time to double-check the internal controls you already have in place, and — if necessary — create fail-safe procedures. Some good reasons exist for creating and sticking to internal control operations, such as maintenance of accurate financial records, fraud prevention and early embezzlement detection.
The Association of Certified Fraud Examiners found in 2014 that internal deception results in businesses losing a median sum of $145,000 annually. Even worse, 22 percent of those cases posted revenue reductions of at least $1 million.
So, look honestly at your business. Does your plan contain holes that make you susceptible to errors? Ensuring that your procedures are in place and working smoothly can help you maintain a solid year-end close as your company grows.
2. Keep payroll compliance top of mind.
Get employees their W-2…