It’s the first of the New Year and you have resolved to get your finances in order. Here are a few steps to get started on the right foot:
Individuals
- Complete new tax exemption documents for work. Every year you should evaluate your with holdings to make sure you are getting the correct amount of taxes withheld from your paycheck. You don’t want too much or too little to be withheld and with the slate now being clean this is a perfect time to change them. To get new federal forms click here.
- Create a new filing system for your important documents. File away old bills, bank statements, and tax returns and start a new filing system to keep track of this year’s bills, invoices, receipts, bank statements, insurance policies, wills, etc. Remember the IRS now accepts electronic copies of documents so if you don’t have space to save these files scan them and save them to your computer or an online storage system.
- Gather your tax documents. While you patiently wait until after January 31st for your tax forms (W-2, 1099’s, etc.) to arrive, you can gather your other important documents together so you will be ready. Documentation from a new home purchase, charitable donation receipts, and unreimbursed job expenses are just a few of the documents you should gather to take to your tax preparer. For a complete list of recommended documents click here.
- Pull your credit reports. You are allowed to get a free copy of your credit reports annually. Click here to get your copy and know where you stand. Review them for accuracy and verify if what’s being reported agrees with your records.
Businesses
- Reconcile bank statements, account receivables and accounts payable. This ensures you know how much money you have spent, who owes you money and who you owe money to. You will need these balances to be accurate for your accrual based financial statements. Make sure you are sending end of year statements to your customers to collect balances due from the prior year. The longer you let these amounts go uncollected the likely hood you won’t receive payment.
- Create a working budget. After you have a final financial statement use it to create a working budget that fits this year’s needs. Using last year’s numbers will help you get a sense of where your actual expenses come from and how you can improve your financial systems using them as a guide. Did you spend a lot on office supplies? Vow to cut that number in half and track it this year. You may want to also consider new expenses to help your business grow. Maybe you didn’t have any advertising expense this year but think it may be worth a try. Go for it but make sure you track your efforts.
- Get those 1099’s and W-2’s filed on time. You must have these documents postmarked by January 31, 2012. There are penalties for not filing these documents on time so make sure this is high on your list of priorities this month.
- Create a new filing system. Just like individuals you need to purge your records to keep track of current year expenses.
- Choose financial software that fits your needs. There are a host of software products that will help you keep track of your actual and budgeted finances. A few of my favorites are QuickBooks, WaveAccounting, and Balance. The size and needs of your organization will determine what will be a good option for your business.
If you want more individualized recommendations we are only a click away. Good luck this year and Happy Finances!
