Catching Up On Overdue Bookkeeping: The Tips And Tricks No One Told You About

As a restaurant business owner, tackling overdue bookkeeping might seem like a tedious task to juggle along with other important responsibilities. But when tax season rolls right around the corner, tax-ready books are your best friend. It will not only keep your records neat and orderly but will also help you comply with IRS recordkeeping requirements for an effective tax return.

Here are simple and doable tasks you can easily get on within bookkeeping. This step-by-step process might be of help to get you through your bookkeeping backlog swiftly.

Step 1: Collect and Gather Business Receipts & Invoices

 Customer invoices
Depending on the accounting method your business uses to operate, consistently reviewing your customer accounts is a must to ensure you’ve collected all invoices for the tax year. On a cash basis, you only need to send an invoice out once you have received payment. For instance, a $500 sale is recorded only until full cash is paid later on. Under the accrual basis, this sale is recognized right at the moment the transaction is done, even if you haven’t received the cash yet.

-Debt collections
Bad debt expenses must be reviewed through in customer accounts. With the accrual basis method, if a customer doesn’t pay you for service completed, you can write this under a bad debt expense. By proving to the IRS that reasonable steps have been taken in debt collection even after being unable to recover such amounts, you may be allowed to deduct the cost of bad debt from your tax return.

Bad debts can be claimed with the use of one of the two specific methods. Under the specific charge-off method, you can deduct a bad debt that becomes partly uncollectible during the year. Under the nonaccrual experience method, you can deduct income from your business gross income for the purpose of a tax return in case you were unable to collect a bad debt.

Business expenses
It is advised to keep a collection of the receipts from every business purchase you have made during the tax year. By doing so, you can use this list of small business tax deductions to make sure you’re tracking and claiming every deduction available to your business.

Vendor accounts
Double-check your copies of every bill from each vendor activity and, if you are missing one, contact the vendor right away and ask them to send you a copy. These may refer to the bills that are still currently operating in your business’s closing period. It is one way to ensure these expenses will appear on your year-end financial statement.

Step 2: Reconcile your Bank Accounts

Reconciling your bank accounts can help you in recognizing any errors or mistakes in company bank records. By comparing every transaction from your bank statements to your company accounting records, you can ensure the balance and data of each account are the same. The moment you identify an error, you can immediately take action and fix any problems to match both records for a smoother business operation.

Getting your bookkeeper to fix your books may cost you more than expected in return for the extra work. But by doing this simple extra reconciliation for your accounts, you are saving your accountant and yourself time and money.

Step 3: Separate Personal and Business Expenses

It is almost always advised to keep personal and business expenses separate. By failing to do so until now, you may end up piercing the corporate veil— meaning the name listed under the same account may be held personally liable for the business’s debt and actions. Operating a corporation or LLC works the same, by recklessly keeping such business affairs in one, you can lose the liability protection afforded by your company structure, and become personally liable for business losses.

Managing personal and business expenses in the same account can result in unnecessary stress when you need to file taxes or do your bookkeeping; it takes more time to sort through personal and business expenses when they’re mixed together in the same account.

If you need to separate your business and personal expenses, the sooner you do it, the better. Be open to learning how to open a small business bank account and keep your finances separate. This is a way to ensure you are free of any unnecessary stress when you are filing taxes or doing your bookkeeping.

Step 4: Go Paperless

When catching up on your bookkeeping affairs, make your life easier by converting your business to paperless transactions.

While processing your paperwork, take time to create digital records of receipts, important documents, and other paperwork using any of the following software tools:

Shoeboxed: scans and organizes your receipts, and automatically creates expense reports from your uploads

FileThis: a smartphone app you can use to photograph and store receipts, statements, bills, and other documents online

Evernote’s ScanSnap Scanner: automatically uploads and stores all scanned documents to Evernote

Step 5: Collect W-9s, 1099s, and W-2s

If you paid independent contractors and/or employees during the tax year, you just might need to file the following forms:

Independent Contractors: Form W-9 & Form 1099-MISC

Have you paid an independent contractor more than $600 for work during the year? If so, be ready to arrange and submit the following forms: a Form W-9 and a Form 1099-MISC.

A W-9 is a form that requests a contractor’s taxpayer information. The contractor completes this form and sends it back to you. You then use the information on the contractor’s W9 to issue 1099 to the IRS. Simply speaking, the Form 1099-MISC is the tax form that the IRS requires you to be able to track payments to independent contractors.

There’s plenty of work involved in gathering W-9s and filing 1099s. If you’re new to the process and unfamiliar with the deadlines, learn how and when to file 1099 for tips on how to make it a much easier process.

Employees: Form W-2
You’re required to file Form W-2 for all employees.

Step 6: Have a Tax Professional Review your Expenses

Doing your own bookkeeping and taxes is truly the least expensive way to go. However, it is still strongly advised that you have an experienced CPA or tax professional review your books, tax deductions, and any other financial information relevant to your tax return, before finally filing your taxes.

This will eliminate unwanted errors and ensure that you’re claiming all of the deductions available to your business. Tax professionals can also speak to the IRS on your behalf, and represent you in the event of an audit, so seeking help from a financial pro is a good idea to go for.

Ready to transform your restaurant's finances? Whether you need Monthly Bookkeeping, a Catch-up Bookkeeping service, or want to embark on our DIY Bookkeeping Course, we've got you covered. Have questions or need more information? Don't hesitate to reach out. Let's talk about how we can support your business. Schedule your FREE 15-Minute Call today and let's get started on your path to stress-free bookkeeping!