Reconciling the books isn’t a difficult process. We’ll just be going over your business transactions from the year and then comparing them against your business account financial statements. This type of auditing is simple but tedious. Many people choose to hire a bookkeeper to ensure there are no mistakes in the reconciliation.
Your business will benefit from better spending accountability, more effective budgeting, and a greater ability to prevent or detect fraudulent spending if reconciliation is a regular practice throughout the year. An added benefit? You’ll never be left in the dark with regard to your S-Corp financials.
As part of our periodic reconciliation (the frequency changes based on the account), we will send you a list of unknown transactions we will need to identify (i.e. checks, Amazon expense) and categorize. Once all transactions are identified and categorized, reconciliation is completed and financial statements can be issued.
Why is it important to make sure all expenses are identified and recorded?
Recording all expenses allows you to reduce your tax liabilities, increase the amount of profit retained by the business (and therefore, by you!). This process includes identifying all your transactions and categorizing them appropriately. Formations does most of it automatically for you, but every month we will need your help with identifying unknown transactions and confirm some of our automatic categorizations. We will also ask you to confirm expenses in the special categories like miles, meals & entertainment, and lodgings.
These potential deductions can supplement deductions for home offices. Home office deductions may include utility use percentages (using a sophisticated formula to calculate the percentage), as well as other expenses otherwise not recognized as business expenses. With Formations, all of these calculations and deductions will be done for you once you complete the onboarding process.