One of our main goals for you is that you have accurate financial statements. I’m going to address three things that you should do as you’re working with your accountant to prepare and file your income tax returns. These steps are part of the final sections in our End of Period Procedures. However, I often see customers overlook them, which leads to costly and time-consuming issues to fix later.
I’ll list each of the three sections here, elaborate on each one, and paint a picture of what happens if you don’t do them.
1. Close the General Journal (Close Period)
We recommend closing the general journal monthly, but if you’re not doing that, you must at least close the journal when you submit financial statements to your accountant. This ensures that the year-end balances in QFloors remain consistent with the data you provided to your accountant.
Why is this critical?
Let’s say that you don’t close the journal as of 12/31/20xx. Almost certainly, someone in your company will create a new transaction, or change an existing transaction, that is dated in that prior year. Those 12/31 balances will then be different from the balances you submitted to your accountant. They’ll prepare and file your tax returns based on the balances you sent them, but your QFloors system will have different balances. That will trickle down to each subsequent year’s ending balances. For each of those subsequent years, you’ll be giving your accountant incorrect balances from QFloors because you allowed the balances to be changed by not closing the journal when submitting financials to your accountant.
Another simple thing you could do to make sure your financials are correct is to verify with your accountant that your QFloors balances match their balances for the most recent year for which tax returns have already been filed. For example, if you’re working on 2024 taxes now, you would verify that your 2023 balances are still correct. You could either send to them the financials from QFloors for that year, or you could compare the QFloors balances for that year to the after-tax financials and/or tax return that you received from them.
If your financials in QFloors don’t match the official balances, when it is eventually discovered, the remedy is to have another general ledger (GL) conversion done, where the QFloors balances are adjusted to match the accountant’s official balances as of the most recent tax return. We charge $200 per hour to do that for you, or you can have your accountant do it, but they will most likely charge more than that. These typically take 1-1./2 to 2 hours to do. Reach out to support@qprosoftware.com if you’re interested in these services.
2. Pay Attention to Any Needed Adjustments As Your Accountant Works on Your Income Tax Return
As you and your accountant review your financials together, pay attention to any adjustments that they may mention are needed, and if there are, make sure you enter them into QFloors. Ask them along the way if there are adjustments you can or should make immediately.
Why is this critical?
The reasons are exactly the same as what I outlined above. Not entering these adjustments means your financials in QFloors are incorrect, and that will pass down to each future year until you fix it.
After making the corrections, if you opened the period, be sure to close the journal again as of the most recent date that you can. Remember, we strongly recommend closing monthly, so if you’re making these corrections in April, for example, you should be re-closing the journal as of 03/31/20xx.
3. Enter Adjustments into QFloors After Your Income Tax Return Has Been Filed
After your accountant has completed your income tax return, you should follow up with them to make sure you receive from them any adjusting entries that should be entered into QFloors (interest expense, depreciation, etc). Then create a journal entry in QFloors for those adjustments (see How to Create a Journal Entry).
Why is this critical?
Again, the reasons are the same. It’s to make sure your QFloors system balances match the official balances.
Too often I have to perform a GL conversion for customers who previously had one done, but neglected these simple steps at tax time. As a result, they’ve reported incorrect balances for each year in between.
It’s often the small and simple things that make a big impact. I hope you see the time and money saved by taking a few minutes to: 1) close the general journal when submitting financials to your accountant, 2) communicate with your accountant to gather all necessary adjustments, and 3) enter those adjustments into QFloors.
