Telling Clients to Prep Before the Close Can Save Them Time and Money

By Christopher R. Cicalese, CPA, MSTFP, Alloy Silverstein Accountants and Advisors  – December 1, 2021
Telling Clients to Prep Before the Close Can Save Them Time and Money The end of the year is often the perfect time for CPAs to tell a business to do some extra work to avoid unnecessary professional fees during tax time. A bookkeeper might be able to shave off some of the time that the CPA needs to spend tidying up the books. Here are a few key suggestions CPAs should recommend to their clients for effective year-end housekeeping:
  • Double check bank reconciliations and outstanding items. Too often, CPAs receive “ready to go” accounting records and the bank reconciliation that perhaps once matched the bank statement no longer does. Prior to turning the books over, it’s important for clients to rerun the reconciliation report, if possible, to make sure nothing has changed. If a bookkeeper sees a pattern that it frequently changes, most accounting packages allow the books to be locked so that changes cannot be made after a certain date without an override. While looking at a reconciliation report, bookkeepers also should review uncleared checks and deposits. After the CPA reviews the report, they frequently will circle back and ask about items that have been outstanding for more than a month. By being proactive and maintaining the uncleared items, bookkeepers can save time for everyone.
  • Make sure equity makes sense. At the end of every year, a business’ equity will close out and start fresh as of Jan.1. Depending how a company maintains its books, if it is carrying separate accounts for contributions or distributions, these accounts should only reflect the current year amounts. The prior year amounts would be closed out to the capital accounts or retained earnings. The most efficient way to maintain equity accounts is for the company to post the adjusting journal entries at the end of the year that the CPA makes to complete their tax return. Upon posting the entries, the company can work with its CPA to ensure that its trial balance matches the trial balance used to prepare the tax return.
  • Tie out debt balances. Debt balances are often overlooked by a bookkeeper as their main concerns are bank reconciliations and making sure payments have been made. Typically, a bookkeeper will post an entire payment against debt rather than breaking it up between interest and principal. Only the interest portion is deductible and flows into the profit and loss statement. Each month, the company should receive a debt statement that can be used to tie out not only the principal balance of the outstanding debt, but also the amount of interest paid during the year. 
  • Confirm investment income and expenses. Another easy way to be more efficient and have accurate books is to make sure investment income and expenses are correct. In most cases, a company’s investment accounts (e.g., checking, securities) will show the year-to-date (YTD) amounts. Often, CPAs will make a workpaper to summarize all the investment income and expenses for the year to verify that everything is recorded correctly. A bookkeeper could make this workpaper ahead of time and update it each month. Providing this as part of the company’s accounting records could prevent a headache or save the company from having to pull a year’s worth of statements for its CPA.
  • Gross up payroll. In almost every case, bookkeepers post net payroll expense because that is the amount of cash that came out of the bank account. CPAs must gross up payroll to make sure all the payroll is accounted for and matches what has been filed with the IRS. This typically entails using the W2s and payroll detail reports to make sure the gross wages on the books match the gross wages actually paid. In addition, this means a bookkeeper has to look at things across the expense accounts that may need to be reclassified to payroll such as an employee’s portion of benefits. This may be one of the harder housekeeping items, but payroll often can lead to a few hours of extra work for both the client and CPA if it is posted incorrectly.
  • Review general ledger for mis-postings. It may sound silly, but checking a company’s year’s worth of work should be at the top of a bookkeeper’s housekeeping list. A quick overview of the general ledger gives the opportunity to see mis-posted items in accounts and allows a client to move things around before submitting records to the CPA. This could be as simple as office expenses accidentally being posted against the travel account or only seeing 11 rent payments despite always paying on the first of the month. Making sure the general ledger is classified correctly means there are fewer journal entries the CPA must make.

While performing the above tasks will not always translate to a decrease in professional fees, it will minimize the chance of extra work that CPAs would have to perform to get the books in working order to produce an accurate tax return. The extra work is often considered out-of-scope, and most CPAs will require clients to pay for their time. To reduce the stress at year end, CPAs should tell their clients that they could even perform some of these tasks at the end of each month. 


Christopher R. Cicalese

Christopher R. Cicalese

Christopher R. Cicalese, CPA, MSTFP, is a manager at Alloy Silverstein Accountants and Advisors. He is a member of the NJCPA and can be reached at ccicalese@alloysilverstein.com.

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