Today’s small business owners are incredibly lucky to have easy-to-use accounting tools like Wave at their fingertips. Throughout the year Wave does so much of the work for you, like importing bank and credit card transactions, it makes it easier than ever to get your financials organized for tax deadlines.
For some, their Wave records may need some attention before the balance sheet and income statement reports are complete and ready for income tax purposes.
Don’t worry – you’re not alone. Here are four easy steps to getting your balance sheet and income statement reports in tip-top shape!
Step 1 – Reconciliation
A big time saving benefit of using Wave is the ability to import your online banking, credit card and payment transaction data. Once the information for your business accounts are imported, all you need to ensure is that Wave matches your account statements and transactions are present in both places.
The best way to start this process is using the ‘reconciliation tool’ found on the transactions page.
Amongst the filters, choose a payment account to reconcile and the date filters for the period you want to reconcile and then the reconciliation tool begins to work.
Once done, simply check mark each transaction to verify and the reconciliation tool will add the transaction balances.
Now you can determine if the balance found on your account statement and Wave match.
Step 2 – Categorize
It’s important to review your transactions to ensure they all pertain to your business. While doing this, you can also categorize each transaction. Two birds, one stone – everyone’s favourite!
To do this, simply click on the down arrow next to the transaction description. In the column under ‘category’, you can choose form your chart of accounts to categorize the transaction.
Handy Tip #1: Clean up double transactions, for the same transaction. When money comes out of one account i.e. chequing and is applied against another account i.e. credit card, you end up with two transactions in Wave. One will be an uncategorized income and the other will be an uncategorized expense.
To create a transfer and link these two transactions you’ll need to click on the small square box far left of each transaction. At the top of the transactions list click ‘transfer’, this will categorize the transaction as a transfer and will no longer be income or expenses transactions.
Handy Tip #2: Avoid doubling your revenue. If you use Invoice and Payments by Wave, the amount of sales revenue indicated on these invoices accumulates in sales revenue on the income statement report.
When this invoice income is deposited, it also appears as an uncategorized income transaction. To avoid double counting revenue, simply select the down arrow next to the transaction and choose ‘create invoice payment’. This will provide a menu of open invoices you can apply the payment towards.
Step 3 – Value Added Taxes (VATs)
Not all Wave users need to capture VATs for each transaction. Some countries have VATs for which the small business owner can recover the amount they spend in the year on VATs.
Handy Tip #3: It’s always a time saver to set up your VAT on the sales taxes page in Wave.
However, in Canada our VATs are GST or HST depending on the province. To capture the VAT on expenses simply click on the transaction to show details. A white box will appear, and then you can choose the VAT to apply to that transaction.
Step 4 – Is everything balanced and categorized.
Once you have reconciled and categorized all your transactions, you can now confidentially use your small business financial reports.
Two key reports to use during tax season are the balance sheet and income statement.
On the balance sheet, double check the date is set to the last day of your fiscal accounting period and then review. The balances showing should match your account statements for the same time period. If they don’t match, take another look in your transactions for further reconciliation.
On the income statement, also double check the date is set for the first day to the last day of your accounting fiscal period. Now you can see if all the amounts listed are categorized and that no uncategorized income amounts or expenses remain. If some amounts and expenses remain uncategorized, revisit your transactions page to categorize.
That’s a wrap!
By following these 4 easy steps, you’ll have accurate and reliable reports you can proudly use to help complete your income tax submission before the deadline. Or happily provide to your accountant for further value this tax season.
If you’re already kicking off 2015 in high gear, it’s easy to find a Wave Pro that can help you get your records up to speed and ready for income tax filing.
More than just taxes!
Wave Pros have helped tens of thousands of Wave users get set up properly for the current fiscal year providing assistance with your small business tax and financial planning, forecasting and goal setting.