Year-Round Bookkeeping vs Tax-Season Scramble

There are two ways to run a small business's records. In one, the books are kept as the year goes: transactions recorded as they happen, accounts reconciled each month, reports read. In the other, the year's records wait until filing time and get pieced together then. This guide makes no claim that either routine costs less or is easier. It looks at what current books are actually used for during the year, in the IRS's and the SBA's own words, and at what a year-round rhythm involves.

Moreno Financial Services is open year-round for bookkeeping, catch-up cleanups and tax questions. Our monthly bookkeeping includes ongoing reconciliation and questions answered year-round, with plans starting at $600/mo and the exact scope confirmed before we begin.

What the IRS says records are for

The IRS's list of reasons to keep good records starts well before the return. Records, it says, help you monitor the progress of your business: they can show whether your business is improving, which items are selling, or what changes you need to make. That is a question an owner asks in any month, not only at year end.

Good records also let you prepare financial statements, and the IRS notes those statements can help you in dealing with your bank or creditors and help you manage your business. A statement is only as current as the books behind it, so a statement drawn from books that stopped months ago describes the business as it was months ago.

Books as a decision tool

The SBA makes the same point from the owner's side: maintaining proper bookkeeping can help keep a business running smoothly, and owners should have a basic knowledge of business finances. The balance sheet, it says, helps you keep track of your capital and provide a cash flow projection for future years.

Current books also make it possible to look at parts of a business separately. The SBA suggests separating and analyzing segments of a business, like comparing online sales to face-to-face sales. For a Central Texas business that might mean market days against a storefront, or one kind of job against another, and it only works if each sale was recorded in a way that can be sorted.

When a lender asks

Financing is where current books show up outside tax. The SBA's guidance on writing a business plan asks an established business seeking financing to include income statements, balance sheets and cash flow statements, and it suggests supplementing a funding request with financial projections. Those statements come out of the books, so a business that keeps them current can produce them when a lender asks, instead of rebuilding months first. Our guide to bookkeeping for Central Texas small businesses explains what each of the three statements shows.

A year-round records rhythm

A steady rhythm needs habits rather than a calendar of dates:

• As things happen: record sales and expenses, and keep the receipt or invoice with each
• Each month: reconcile every bank and card account to its statement
• Each month: read the profit and loss and the balance sheet, and note anything unexpected
• Before seeking financing: pull past income statements, balance sheets and cash flow statements from the books
• At year end: gather the reports for whoever prepares the return

The monthly reconciliation

The IRS guide to starting a business and keeping records suggests reconciling the business checking account each month. Reconciliation is the check that holds the rest of the rhythm together, because it confirms that what the books say happened in an account matches what the bank says happened. The step-by-step version is in our guide to monthly bank reconciliation. Tax dates for businesses are on the IRS tax calendar, linked below, so a year-round rhythm leaves the dates to the calendar and keeps the records ready whenever one arrives.

When the year was left until filing time

If the records have already waited until filing time, the job becomes rebuilding the year first, from statements, invoices and receipts, before any monthly rhythm can start. Our guide to catch-up bookkeeping walks through the order that work follows, and catch-up cleanups are scoped and quoted separately.

Free help, and where we fit

Owners who keep their own books have free help to lean on. The Office of the Texas Governor describes Small Business Development Centers as providing free advice on marketing, financing and business growth, and SCORE as a national network of experienced executives who volunteer as mentors. The centers that serve Bell, Coryell and Lampasas counties are named in the small-business bookkeeping guide linked above.

Year-round bookkeeping and catch-up cleanups are core services for us. Owners who would rather hand off the monthly work can book a free 15-minute call, and if someone else prepares your return, we send them reports they can work from.